lient B made factory-applied paints, known in the trade as “industrial coatings.” It had three problems. Many products that were once made in the U.S. were now being manufactured overseas, and used locally-made paints. Secondly, many products made in the U.S. were being downsized physically, and hence needed less product. Finally, the domestic market was overcrowded with “Mom & Pop” companies, which made price competition severe. As a result, investors and analysts seemed to regard this company as part of a stagnant industry and accorded it low p/e ratios.

Solution: In reality, its prospects were quite different, but they were relatively unknown or under appreciated, by investors. The Environmental Protection Agency had issued rules that severely curtailed the amount of noxious emissions that could be released into the atmosphere, which is a natural by-product of the painting process. Consequently, we devoted considerable space in the annual report to discussions of our client’s successful research efforts that met the new EPA guidelines. Heretofore, research rarely got much notice, even though our client was on the cutting-edge of new processes.

Wall Street suddenly changed its perception of this company. In fact, one analyst said this company’s not a paint company; it’s a research company. As a result, price/earnings ratios increased to a point where the client could use its stock to acquire companies advantageously, and keep its cash in its corporate treasury.

Moral of the Story: Changing Wall Street’s perception of a company by providing facts about it that heretofore were given only slight mention can have a major impact on its stock price and price/earnings ratio.