Amid today’s sometimes volatile, sometimes plain depressed equity markets, is it surprising that CEOs should pull out their hair as they try to understand the forces that drive the price of their companies’ shares? Get-ting a handle on what makes share prices rise and fall is crucial for crafting strategy, planning announcements, and assessing resources. No wonder that as the ranks of investors have grown and as an increasing number of mergers and acquisitions come to use shares as their currency, today’s executives spend more time than ever keeping an eye on the stock ticker.

The genuinely good news is that executives can draw reassurance from an important trend evident to those who follow valuation problems closely: more and more investors, analysts, and investment bankers are turning to sophisticated discounted-cash-flow (DCF) models as the touchstone of accurate valuation. Under the DCF approach, assumptions about profits and cash flows years down the road determine a company’s stock price. In theory, it should take care of itself if the CEO does a good job and creates value.

Unfortunately, even as the DCF method gains ground, CEOs are all too aware that markets also seem to be fixated on quarterly earnings and...