Introduction
Visibility refers to the financial potential or future of a business organisation. In financial markets, the visibility of a company refers to the estimation of future financial performance.
Visibility may depend on the underlying factors, such as time, whether short-term or long-term, market conditions affecting a business, among others. In general, visibility refers to the potential earnings or turnover expectations from a business.
Understanding Visibility
The visibility of a company may be high or low. High visibility shows investor’s or analyst’s confidence in the company’s business. On the contrary, low visibility indicates a lack of growth with low investor confidence.
A company’s management generally provides estimates of future earnings or sales. Similarly, financial market analysts engage with the company’s executives to discuss the visibility of future earnings.
Analysts cover various companies in their research reports. Higher visibility indicates higher confidence in the company. It also indicates that business practices and processes set by the management are robust and able to secure business opportunities. Employees are compliant with the organisational policies and meeting the business targets.
Low visibility means the company does not have growth in its business and is not able to demonstrate confidence in its future projections. Low visibility can happen due to internal or external factors affecting the company.
Such a company should provide reasonable projections about its future performance. On the other hand, a company with high visibility should mention the estimations and contingencies on which the future performance depends.
Role of Time
One of the significant factor affecting visibility is time. A company may not have short term visibility, say a quarter to two, but may have long-term visibility, say over a year. Hence, certain businesses may be seen as unfavourable vis a vis their competitors in the short-term, thus affecting their short-term visibility.
Conclusion
Each company or organisation has a different business model, risks, capital employed, and other factors. Despite the differences, companies are categorised into broad segments for peer comparison.
For example, a healthcare company is set up against its peers for comparison in performance, the scale of operations, market share, and so on. Visibility helps a company to gain confidence in the investor community and continuous engagement with the market.
