One should do the work, and then get the reward, not grab the reward, and expect to not have to do the work. That is not how the world works, and it's usually not how the capital markets work either.
The only thing that a high valuation implies, is high expectations. Those high expectations, in turn, would indicate poor future returns, not least as those high expectations are known, and competition will come rushing into this promised land.
If a company wants to raise it's valuation, it should rather look at for unusual profitability. If one is in the gambling business, for example, one may want to take a look at Evolution (EVO). EVO has a net profit margin of 58 %. Sure, the gambling business is quite lucrative per se, but this is not normal. And EVO is not a tiny co – market cap of around 28 bn USD. How can this be? The market must have judged that EVO has a moat that is so wide as to be impenetrable – otherwise someone would've breached it by now. (Or perhaps the breach is ongoing – EVO's monster margins has actually stopped growing, although not yet begun to diminish.)
Anyway, that's how you look for inspiration on where to grow your business. If you get into such a field successfully, and thus raise your profitability, that will in turn raise your valuation.* But you have to go about in the right way. You have to first lay the egg, then hatch it – then it grows into a chicken, and then it becomes a full-grown hen or rooster. You can't just decide, "hey, I wanna become a fine, proud rooster with a high valuation".
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* And while I would argue that a high valuation is not in the investor's interest, it may be (and indeed, probably usually is) in the company's interest. Because the company can do all kinds of things with that higher valuation. (That last part is probably the best reason to argue that even a truly long-term investor would prefer a high valuation to a low one.) However, most companies (i.e., most CEOs/mgmt's) don't know how to make proper use of a high valuation, thus rendering it useless. On the contrary, they instead tend to get hubris, and do still more stupid things than they usually do. |
