Equity research reports are one of several types of key documents analysts have to gather before diving into a full-scale financial modeling project. Barring a new company initiation or an unexpected event, equity research reports tend to immediately precede and follow a company’s quarterly earnings announcements. Valuation methods take all the assumptions from the forecast and build on them with even more assumptions, such as a valuation multiple https://forexarena.net/ and/or a discount rate, both of which are very subjective.

1. Next, you’ll see a section with lots of graphs and charts detailing the company’s financial performance, market share, and important metrics and ratios.
2. Equity research reports are usually available for a fee through financial data providers.
3. Buy-side analysts research stocks to identify investments for their own firm to invest in.
4. In each case, we started by creating traditional HF/AM stock pitches and valuations and then made our views weaker in the research reports.
5. In a stock pitch, you’ll spend most of your time and energy on the Catalysts, Valuation, and Investment Risks because you want to express a VERY different view of the company.
6. The third cell, cell C, is used for a formula that divides the difference between cells A and B by cell A.

Educational Qualifications for an Equity Research Analysts

Finally, equity researchers may be tasked with developing investment models and screening tools that identify trading strategies that help manage portfolio risk. Financial modeling is a set of numerical techniques used to forecast a company’s future growth. Based on the information in a company’s income statement, balance sheet, and estimates of future economic conditions, analysts can create sophisticated projections equity research financial modeling of an investment’s future performance.

The Full Tutorial, Video, and Sample Equity Research Reports

In order to help you formulate your own opinion, here’s a head-to-head comparison of equity research (sell-side research that is conducted by the research departments of broker-dealers) and investment banking in 10 key areas. The financial modeler creates one cell for the prior year’s sales, cell A, and one cell for the current year’s sales, cell B. The third cell, cell C, is used for a formula that divides the difference between cells A and B by cell A.

Valuation

Similarly, the report might mention catalysts and investment risks, but there won’t be a link to a specific valuation impact from each factor. In a stock pitch, you’ll spend most of your time and energy on the Catalysts, Valuation, and Investment Risks because you want to express a VERY different view of the company. Most of their time is spent speaking with management teams and institutional investors and sharing their views on sectors and companies. The CMA does not make any representation as to the accuracy or completeness of these materials, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of these materials. If you do not understand the contents of these materials, you should consult an authorised financial adviser.

Use the form below to download a research report from JP Morgan by the analyst covering Hulu. Of course, research reports are also released immediately upon a major announcement like an acquisition or a restructuring. Take your learning and productivity to the next level with our Premium Templates. Access and download collection of free Templates to help power your productivity and performance. We do give reasons for why these companies might be mis-priced, but the reasoning isn’t that detailed.

To create a useful model that’s easy to understand, you should include sections on assumptions and drivers, an income statement, a balance sheet, a cash flow statement, supporting schedules, valuations, sensitivity analysis, charts, and graphs. Examples of financial models may include discounted cash flow analysis, sensitivity analysis, or in-depth appraisal. Although investment bankers and research analysts both have to steer clear of conflicts of interest, this is a bigger issue in equity research than in investment banking.

The low end of the salary range is $52,000, while the high end sits at $147,000. Private equity firms and other financial services companies are the chief employers of equity researchers. The majority of these jobs are based in New York City, although firms are increasingly offering positions in major metropolitan hubs like Chicago, Boston, and San Francisco.

The reputation of a firm’s research department may be a significant factor in swaying a company’s decision when selecting an underwriter when it has to raise capital. But even though the investment firm may make a substantial amount through underwriting fees and commissions, research analysts are prohibited from being compensated directly or indirectly from investment banking revenues. Investment banking may no longer be the undisputed first choice for the best and brightest. Instead of streaming into investment banking, many top graduates are now opting for careers in management consulting, technology, or launching their own startups. While the allure of investment banking may have dimmed, due to long hours and a stressful work environment, the industry still attracts many workers.

Banks often use equity research as a way of “supporting” their investment banking and sales & trading clients, by providing timely, high-quality information and analysis. Sell-side analysts work for investment banks and brokerages and research stocks in order to provide investment recommendations for their clients and the public. Buy-side analysts research stocks to identify investments for their own firm to invest in.

Overall, if one has to make a choice between embarking on a career in equity research versus one in investment banking, factors such as work-life balance, visibility, and barriers to entry favor equity research. On the other hand, factors like prospects for advancement, job functions, and compensation tilt the scales in favor of investment banking. Ultimately, however, the choice comes down to your own skill set, personality, education, and ability to manage work pressures and conflicts of interest.