The Say/Do Ratio: Measuring Whether Management Means What It Says

The Say/Do Ratio is a management credibility metric that measures the gap between what company leadership promises in annual reports and what they actually deliver. It is a concept central to The Q Factor's methodology, and we believe it represents one of the most underused signals in investment research.

The premise is straightforward. Every annual report contains forward-looking commitments: revenue targets, margin guidance, expansion plans, capital allocation promises, strategic milestones. Management puts these on the record voluntarily. The Say/Do Ratio asks a simple question: did they follow through?

Why the Say/Do Ratio Matters for Investors

Financial metrics tell you what a company has done. The Say/Do Ratio tells you whether the people running the company can be trusted to do what they say they will.

This distinction matters because investment decisions are inherently forward-looking. When you buy a stock, you are not buying the past; you are buying management's ability to execute on their stated plans. A company with strong financials and poor management credibility may be coasting on past performance. A company with improving financials and high management credibility is more likely to sustain that trajectory.

Our backtesting supports this. Across 2,003 company-year observations spanning the ASX, NZX, SGX, and US exchanges, companies rated STRONG on our methodology (which incorporates the Say/Do Ratio as part of the qualitative assessment) averaged returns of +26.3% over three years. Companies rated WEAK returned +0.7% over the same period. The correlation between Q Score and actual returns was r = 0.381, statistically significant at p < 0.0001.

How the Say/Do Ratio Is Calculated

The calculation follows a structured process applied consistently across every company in our universe.

Step 1: Extract commitments from the annual report. We read the full annual report and identify every specific, forward-looking commitment management makes. These must be verifiable: "we will expand into three new markets by FY2026" qualifies; "we remain committed to growth" does not. Vague aspirational language is excluded because it cannot be measured.

Step 2: Categorise each commitment. Commitments are classified by type: revenue and financial targets, operational milestones, capital allocation (dividends, buybacks, debt reduction), strategic initiatives (M&A, market entry, product launches), and ESG or governance commitments. This categorisation matters because delivery patterns often differ by category. A company may consistently hit financial targets while repeatedly missing project timelines.

Step 3: Track outcomes in subsequent reports. When the next annual report is published, we check every prior commitment against the reported results. Each commitment receives one of five statuses: Delivered, Partially Delivered, Missed, Not Addressed, or Too Early to Assess.

Step 4: Calculate the ratio. The Say/Do Ratio uses confirmed outcomes only (Delivered and Missed). Partially Delivered is not counted as either because it introduces subjectivity about what constitutes "enough." Not Addressed is tracked separately because it is its own signal: a commitment that management silently drops is different from one they explicitly missed.

What the "Not Addressed" Category Reveals

This is where the Say/Do Ratio becomes more nuanced than a simple pass/fail metric. When management makes a specific commitment in one annual report and then simply does not mention it in the next, that silence is informative.

A company that states "we targeted 15% revenue growth and achieved 11%" is being transparent about a miss. A company that targeted 15% revenue growth and says nothing about it the following year is engaging in selective reporting. Our data shows that high rates of "Not Addressed" outcomes correlate more strongly with subsequent rating downgrades than explicit misses do. Transparency about failure is, paradoxically, a positive signal.

Across our universe, approximately 34% of all tracked commitments fall into the Not Addressed category. This is not a small number. It suggests that a third of what management promises to shareholders is quietly abandoned without acknowledgement.

Say/Do Ratio Benchmarks by Credibility Tier

Based on our data across 600+ companies, here is how we interpret the ratio:

Say/Do Ratio	Credibility Assessment	What It Means
70% and above	Solid credibility	Management means what it says. Commitments are realistic and followed through.
50% to 69%	Mixed track record	Promises are aspirational rather than reliable. Discount forward guidance accordingly.
Below 50%	Poor credibility	Consistent pattern of over-promising. Management sets expectations it does not meet.

These benchmarks are derived from percentile analysis of our full dataset, not chosen for convenience. A 70% threshold places approximately 15% of companies in the "solid credibility" tier, which aligns with the proportion of companies rated STRONG on our overall methodology.

What the Say/Do Ratio Looks Like in Practice

To illustrate how this works in practice, consider a worked example. Woodside Energy, one of Australia's largest energy companies, has been tracked across nine consecutive annual reports. Over that period, 76 forward commitments were extracted and tracked.

In the most recent period: 25 of 39 commitments were delivered, 13 were not addressed, and 1 was missed. The company has been rated MODERATE for nine consecutive years. It has never broken into the STRONG tier. The pattern is persistent, not dramatic: financial commitments (dividends, gearing targets) were consistently delivered, while project timelines (Scarborough, Trion) were more variable.

Nine years of data tells you something that a single year never could. Management credibility is a character trait, not a single data point. The full Woodside worked example is available at Say/Do Worked Example: Woodside.

How the Say/Do Ratio Differs from Other Management Assessment Approaches

Most existing approaches to assessing management quality fall into one of three categories, each with significant limitations.

Insider trading signals track whether executives are buying or selling their own stock. This is useful but reactive: by the time insider selling is disclosed, the information asymmetry has already been exploited. The Say/Do Ratio is prospective; it tells you about management's pattern of behaviour before the next set of results arrives.

Compensation analysis examines how management is paid and whether incentive structures align with shareholder interests. This is valuable but measures incentive design, not execution. A CEO with a well-structured package can still over-promise and under-deliver. The Say/Do Ratio measures what actually happened.

Sentiment analysis and NLP uses natural language processing to score the tone of annual reports. While this has advanced considerably (FinBERT and related models achieve approximately 92% sentiment classification accuracy), it measures how management talks, not whether they do what they say. A company can write a cautious, measured annual report while consistently missing targets. The Say/Do Ratio sits one level deeper: it compares the substance of commitments against outcomes, not the tone of the language.

Limitations of the Say/Do Ratio

Transparency about limitations is part of our methodology. The Say/Do Ratio has several.

First, commitment extraction requires judgment. What constitutes a "specific, verifiable commitment" involves interpretation. We apply consistent criteria, but two analysts reading the same report might extract slightly different commitment sets. This is inherent to qualitative analysis.

Second, external conditions matter. A company that commits to 10% revenue growth and then faces an unforeseen pandemic is not necessarily over-promising. We distinguish between commitments missed due to execution failure and those affected by genuine external disruption, but the line is not always clear.

Third, the ratio requires multiple years of data to become meaningful. A single year's ratio is noise. Two years is a data point. Three or more years is a pattern. Companies with fewer than two years in our universe have Say/Do tracking that is preliminary rather than definitive.

Fourth, we do not capture every commitment. Some are embedded in investor presentations, earnings calls, or capital markets days rather than the annual report itself. Our methodology uses the annual report as the single source of truth because it is the most comprehensive, most formally reviewed document management produces. But this means some commitments made through other channels are not tracked.

How to Use the Say/Do Ratio in Your Investment Process

The Say/Do Ratio is not a standalone investment signal. It is an input into a broader assessment, weighted alongside financial health, valuation, sector dynamics, and competitive positioning.

The most practical application is as a discount factor for forward guidance. When a company with a 75% Say/Do Ratio provides revenue guidance, you can treat that guidance with reasonable confidence. When a company with a 40% Say/Do Ratio provides the same type of guidance, you should discount it heavily. The market often does not make this distinction; it reacts to guidance at face value. That mispricing is the investment opportunity.

The second application is as an early warning system. A declining Say/Do Ratio across consecutive years, even if the absolute level remains acceptable, signals deterioration. Management that was once reliable is becoming less so. This trend often precedes financial deterioration by one to two reporting cycles, giving investors time to reassess their position.

How The Q Factor Tracks the Say/Do Ratio Systematically

Tracking the Say/Do Ratio for a single company across multiple years is manageable for a dedicated analyst. Tracking it across 600+ companies on four exchanges is not practical without a systematic approach. This is why The Q Factor exists.

Every company in our universe has its commitments extracted, categorised, and tracked. The Say/Do Ratio forms part of the qualitative assessment (weighted at 30% of the overall Q Score) alongside management confidence, strategy clarity, risk transparency, growth outlook, and competitive position. The quantitative assessment (weighted at 70%) covers financial health metrics including return on equity, debt levels, revenue growth, valuation, and financial distress indicators.

Company scores and ratings (STRONG, MODERATE, or WEAK) are available for free at theqfactor.io/stocks. Full analysis reports, including the Say/Do breakdown by commitment category, the Not Addressed rate, and the year-over-year credibility trend, are available per company at theqfactor.io/pricing.

This methodology documentation is part of The Q Factor's educational content. This is not financial advice. The Say/Do Ratio is one component of a broader assessment methodology. Past patterns may not predict future performance. Always conduct your own research before making investment decisions.