Impact of Higher Residual Income on Equity Valuation

Residual income models (RIM) are an essential approach to valuing a company's equity. They consider both the actual earnings of a company and the required return on equity to determine the residual income, which is the income generated in excess of the required return. An investor wants to understand how changes in residual income impact the valuation of a company's stock. If a company has a higher projected residual income, what can be inferred about its equity valuation?