Visibility

Visibility is a term used to portray the extent to which company management or analysts following the company can estimate future performance. Visibility can range from low to high (or adjectives conveying similar meaning), from the near-term to the long-term. When executives or equity analysts talk about visibility, they are referring to sales or earnings. Management may comment on visibility in press releases, during earnings conference calls or at investment bank-sponsored meetings or conferences. Analysts can discuss visibility in their research reports to clients.

The amount of visibility for a company is largely dependent on the state of the economy. When an economy is stable and growing, a company may have good visibility to confidently project sales or earnings; when it is weak or at cross-currents, a company will not likely have much visibility, in which case it would refrain from providing sales or earnings guidance to analysts and investors. In some cases, however, no matter the economic environment, a company may be able to see a clear path for growth of its business, particularly if it is the process of launching or ramping up deliveries of products for which there is solid demand.

Aside from the low-to-high portrayal spectrum, visibility can be characterized by length — short-term, long-term or even a specific interval such as, for example, "from now to the end of the calendar year." A company with low short-term earnings visibility may be questioned why this is the case if a competitor has high short-term visibility. A company that states it has strong earnings visibility over the long-term will be regarded in a favorable light by investors. An analysis of the reasons for this high visibility would be useful for investors to better understand a company's business model. Executives would prefer not to discuss low visibility, as this may discomfit investors, but it may be necessary to set reasonable expectations in the market for its stock. Management that boasts high visibility, on the other hand, should offer caveats to its optimistic outlook in case expectations for growth are not realized in the future.