Key metrics to evaluate the Investor Relations (IR) team performance

The main role of an IR team is to ensure excellent communication between a company and its investors. Evaluation and performance metrics are means for IR teams to demonstrate that they are contributing in a positive way to the company’s performance. Achieving short- and long-term goals along with delivering well-defined quantitative and qualitative metrics allows IR teams and employees to define the added value they bring to the company. Listed below are some metrics that can help measure the performance of your IR Team:

Quantitative metrics

Quantitative metrics are related to the fundamental performance of the company. Therefore, the IR team cannot be expected to achieve positive results if the financial statements do not support a positive narrative. That said, here are some of the metrics that can help measure the IR team’s performance.

• Investor retention rate

Investor retention is a crucial metric for assessing whether communication efforts are meeting the expectations of current investors. Maintaining a stable and engaged investor base is a sign of confidence in the company’s communication. Look at the percentage of shareholders retained from previous periods and compare it to your competitors’ retention. If your IR team can maintain or increase this percentage, it is an indication that communication is effective.

• Analyst ratings and coverage

The number of analysts following the company can provide valuable insight into how well the IR team is meeting its objective of providing consistent information to the analyst community. An increase in these number suggests that the IR team’s efforts are helping analysts make accurate estimates and increasing the company’s visibility among investors. On the other hand, if the number of analysts decreases, this could indicate that you are not responding effectively to analyst requests, which could generate disappointment.

• Share price or valuation

It is important to remember that several other metrics, such as revenue growth, profitability, management credibility, among many others, have a greater impact on the share price than IR strategy. However, their importance as an indicator of IR success should not be underestimated. A sustained increase in share price can indicate that the company is effectively communicating its strategy and performance to investors and the market.

• Number of invitations to conferences or events

This metric considers the number of events and activities to which investors, financial analysts and brokers are invited as part of IR strategies. These events may include presentations, conferences, webinars and meetings designed specifically for the financial community. Evaluating this metric provides insight into the frequency and breadth of interactions between the IR team and the market. The result directly influences the perception and quality of your coverage of the company.

Qualitative Metrics

• Frequency and quality of communication

Consistent and transparent communication is essential to maintain a strong relationship with investors. Evaluate the frequency and quality of communication, such as quarterly reports, press releases and investor presentations. Make sure the information is clear, accurate and relevant to investors. Positive feedback on the quality of communication and the availability of information can indicate effective performance by the IR team. Also, attendance at bank-organized conferences and non-deal roadshows are crucial to maintain contact with investors and keeping track of them and comparing them historically and vs. peers can be a good indicator of team performance.

• Investor perception studies

Perception surveys are a direct way to get feedback from investor analysts on the effectiveness of communication and relationships with the IR team. These studies can reveal how investors and/or analysts perceive the IR team. Conducting studies on a regular basis and comparing the results with previous studies will help identify areas for improvement and measure progress over time.

Combination of quantitative and qualitative metrics

Quality of investor meetings and share purchases

This metric allows IROs to evaluate whether their efforts to interact with investors are converting investors into shareholders of the company. When you have investor meetings that are effective, whether in person or online, several key objectives are achieved.

First, these meetings provide investors with a clear understanding of the company’s investment proposition. Once these meetings conclude, if investors are confident in the company’s prospects and direction, they are likely to buy more shares over time. This demonstrates the effectiveness of IR efforts. In short, the quality of meetings impacts investor confidence and stock purchases.

Measuring the performance of your IR team is essential to ensure effective communication and strengthen investor confidence in the company. Although several factors can affect these metrics and results, evaluating them will provide a full understanding of how the IR team is performing and its impact on the company’s perception before the market. As always, our team at Miranda IR is ready to assist you in any matter regarding the continuous improvement of the IR team’s communication and performance.