Bob’s “Peer Group” Explainer: I Don’t Think THIS Is Quite What The SEC Had In Mind, When It Adopted The Rule…

Ahem. I am old enough to remember when the SEC first proposed — and then, with substantial modifications — adopted the so called “Peer Group” (vs. independent third party constructed index) annual reporting/proxy statement disclosure rule modifications. [Gosh — it seems like yesterday. Smile.]

Wisely assuming that most companies had very honest leadership, the SEC left quite great leeway to the companies themselves — to define their “peer groups”, for comparison performance metric purposes. Many use a very broad peer group, often with dozens of “peers”. Mattersight uses only three. The SEC figured that — since companies would have to live through good and bad years at the self-constructed “peer group,” as well as internally, the notion of which to include would be largely self-regulating.

I supsect had Mattersight defined a much broader peer group, here some 17 years on, it would look MUCH worse, by comparison. But as it is — it looks pretty darn God-awful.

And so, with that lead-in, here is Bob’s excellent contribution for the day:

“…How are we to properly assess Mattersight’s performance beyond their own dismal numbers? Is their whole industry like them?

Fortunately we have a very convenient way. In Mattersight’s annual report, they illustrate their stock performance against a “peer group” and the whole broad stock average. I don’t know how this group is determined, but the annual report suggest there are only two companies against which they believe are their peers, Nice Systems, an Israeli company that trades American Depository Shares and Verint Systems, a US company. Both companies are approximately 50 times larger than Mattersight, stretching the term peer a bit, but they offer similar solutions for call centers (routing, performance analytics, etc).

Unfortunately, over the past five complete reported fiscal years, both of NICE and Verint have been profitable. NICE averaged a 12.5% profit and Verint averaged a 2.5% profit. Verint’s only recent loss was a 2.5% loss in the last complete year.

On a stand-alone basis, Mattersight’s performance was terrible, and in comparison to their own selected peer group, it’s confirmed….”

Confirmed in spades — indeed.

Namaste, one and all — I am off-grid until Tuesday night, traveling to — and taking part in — goofy eclipse festivities well south of here (likely in Music City, depending on cloud cover, on the actual morning). [Say a prayer for Barcelona, and Charlottesville. ]

2 thoughts on “Bob’s “Peer Group” Explainer: I Don’t Think THIS Is Quite What The SEC Had In Mind, When It Adopted The Rule…”

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