A Logical Benchmark

What is Required Business Performance®?

Can management deliver the Required Business Performance® to support the stock price?

Required Business Performance®, or RBP®, is the revenue growth necessary to support the current stock price. Transparent Value recognizes that a company's stock price implies certain business performance and uses its proprietary RBP® Methodology to determine each company's Required Business Performance®. Next, using historical data, Transparent Value quantitatively determines the likelihood management will deliver the Required Business Performance®. We call this likelihood RBP® Probability, and we call the likelihood management will fail to deliver the Required Business Performance® the Behavioral Risk Indicator.

We believe stock prices are a reflection of the collective assumptions for future performance by investors. However we also believe these assumptions can become biased due to investors' systematic behavioral biases, causing misalignment between stock prices and managements' ability to deliver. We therefore feel that knowing how much revenue growth management must deliver to support the current stock price is critical to assessing the risk profile and relative attractiveness of stocks. This approach is the basis for used in our proprietary investment methodology.

Transparent Value's RBP® Methodology aims to link a company's current stock price to what its management does on a day-to-day basis and its ability to deliver in the future. We believe that investors' systematic behavioral biases can affect stock prices causing a misalignment between the stock price and management's ability and as a result we believe investors often unknowingly expose themselves to behavioral risk, which may hamper returns.