To the contrary, the analyst community tends to accept management visions based on word alone, without critically examining the likelihood of their success. Research reports simply reiterate management statements, and stock prices rise before a single quarter of improved performance is delivered. In order to avoid a major correction in value, investors should consider a number of factors when evaluating promises of future growth. In general, investors should be concerned with the level of detail provided in support of management's plan, the historical performance of the company's products and brand name, and the timeframe for accomplishment. New Product Introductions.
New products are the backbone of nearly all turnaround initiatives.
Successful new products create excitement among consumers and motivate them to make additional purchases at higher prices, producing attractive operating margins. In an extremely competitive retail environment, most consumer products companies will have great difficulty introducing price increases. First, they must gain retailer acceptance. Second, the elasticity of consumer demand must be determined. As large mass merchants, such as Walmart, Kmart and Target, look to improve their own margins through private labels and overseas sourcing, even the strongest brand names will face resistance on pricing adjustments.