What Is Visibility?
The term “visibility” is used to describe the extent to which a company’s management teams can estimate future performance. Visibility can range from low to high or from short-term to long-term. When Financial analysts talk about visibility, they are referring to sales or earnings.
Management may express their vision of visibility in press releases, during executive conference calls, or at investment-sponsored meetings or conferences. Financial analysts can discuss visibility in their research reports to clients to help them make investment decisions for companies and other executives.
The Effect the Economy has on Visibility
The visibility of a company is largely dependent on the current state of the economy. When an economy is stable and growing, companies might have high visibility to project sales or earnings confidently.
But when the economy is weak or in recession, companies will not have a clear vision. When times are uncertain, a business is more likely to refrain from providing sales or earnings portfolios to financial analysts and investors.
When perception is low and operations are otherwise stable, this does not present the company in a negative way as its operations are still a good investment. If the company has the strength to hold on during the economic downturn, then it could still be a positive investment due to its ability to stay strong during a time of a poor economy.
In some instances, financial analysts may be able to see a brighter future for the growth of the company, no matter the economic circumstances. This is especially true if the company is in the process of campaigning or accelerating deliveries of products for which there is significant demand.
Understanding the Visibility of your company
Visibility occurs when a company’s executive team or Financial analysts make forecasts about the future earnings or sales of a company. Having vision shows that the processes have been put into place by management and are followed by the rest of the company.
Companies are enhanced for better performance if the executive team has a high and full clear vision in the organization. High visibility generally means they are positive in their financial visions. Low visibility is the opposite, that their confidence is low. Low visibility primarily happens when there is movement in economic patterns or changes in the targeted market.
Company executives typically prefer not to talk about low visibility, as this may make investors feel uncomfortable and unsure. But it’s not entirely preventable, so it may be important that management set reasonable calculations in the market for the company’s stock. Management that boasts high visibility, on the other hand, should offer a caution to their glass half full outlook in case expectations for growth are not produced in the future
Transparency compared to Visibility.
Visibility should not be misconstrued with transparency. Even though the two terms are often used correspondently with one another, they are very different. While one is a projection of a company’s future production, the other describes how attainable information is by a company and its management team.
A company is transparent when it openly and freely shares financial knowledge, such as reports, prices, and production practices to its investors, its employees, or even the general public.