Under Promise and Over Deliver

Ian Cassel Blog Leave a Comment

Earnings season is finally ..at least for those micro caps that file on time 😉 The micro cap space is notorious for two different management styles:  Those that over promise and under deliver and those that under promise and over deliver.  What management teams don’t understand is you get one (maybe two) chances to earn investors trust, and once that trust is broken it takes quarters to earn that trust back.  This is why it’s crucial for management teams to always under promise and over deliver.  ZAGG is a perfect example of a company that learned its lesson.  In late 2008 into 2009 the company got off to a fast start when its products started hitting the shelves of Best Buy and retailers.  The company’s growth was very impressive.  The company started to give guidance that even the analysts following the stock didn’t believe.  The company over promised and under delivered on a quarter and the stock got cratered going down by 50%+ to $2.  But the company learned its lesson, started under promising which the analysts vocally endorsed, and ZAGG started over delivering.  After 6 quarters of over delivering the stock is up multiples from those levels.  Too many management teams with great growth stories fall into the trap of over promising when investors want the exact opposite.   When I talk to management teams, I always make it clear, if you think you’re going to grow 100%, tell the street 30-40%, and then crush those estimates.

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