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What’s in an Equity Research Report?

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Even though you can easily find real equity research reports via the magical tool known as “Google,” we’ve continued to get questions on this topic.

Whenever I see the same question over and over again, you know what I do: I bash my head in repeatedly and contemplate jumping off a building…

…and then I write an article to answer the question.

To understand an equity research report, you must understand what goes into a  stock pitch first.

The idea is similar, but an ER report is a “watered-down” version of a stock pitch.

But banks have some very solid reasons for publishing equity research reports:

Why Do Equity Research Reports Matter?

You might remember from previous articles that equity research teams do not spend that much time writing these reports .

Most of their time is spent speaking with management teams and institutional investors and sharing their views on sectors and companies.

However, equity research reports are still important because:

• You do still spend some time doing the required modeling work (~15%) and writing the reports (~20%).
• You might have to write a research report as part of the interview process.

For example, if you apply to an equity research role or an equity research internship , especially in an off-cycle process, you might be asked to draft a short report on a company.

And then in roles outside of ER, you need to know how to interpret reports quickly and extract the key information.

Equity Research Reports: Myth vs. Reality

If you want to understand equity research reports, you have to understand first why banks publish them: to earn higher commissions from trading activity.

A bank wants to encourage institutional investors to buy more shares of the companies it covers.

Doing so generates more trading volume and higher commissions for the bank.

This is why you rarely, if ever, see “Sell” ratings, and why “Hold” ratings are far less common than “Buy” ratings.

Different Types of Equity Research Reports

One last point before getting into the tutorial: There are many different types of research reports.

“Initiating Coverage” reports tend to be long – 50-100 pages or more – and have tons of industry research and data.

“Sector Reports” on entire industries are also very long. And there are other types, which you can read about here .

In this tutorial, we’re focusing on the “Company Update” or “Company Note”-type reports, which are the most common ones.

The Full Tutorial, Video, and Sample Equity Research Reports

For our full walk-through of equity research reports, please see the video below:

Table of Contents:

• 1:43: Part 1: Stock Pitches vs. Equity Research Reports
• 6:00: Part 2: The 4 Main Differences in Research Reports
• 12:46: Part 3: Sample Reports and the Typical Sections
• 20:53: Recap and Summary

You can get the reports and documents referenced in the video here:

• Equity Research Report – Jazz Pharmaceuticals [JAZZ] – OUTPERFORM [BUY] Recommendation [PDF]
• Equity Research Report – Shawbrook [SHAW] – NEUTRAL [HOLD] Recommendation [PDF]
• Equity Research Reports vs. Stock Pitches – Slides [PDF]

If you want the text version instead, keep reading:

Watered-Down Stock Pitches

You should think of equity research reports as “watered-down stock pitches.”

If you’ve forgotten, a hedge fund or asset management stock pitch ( sample stock pitch here ) has the following components:

• Part 1: Recommendation
• Part 2: Company Background
• Part 3: Investment Thesis
• Part 4: Catalysts
• Part 5: Valuation
• Part 6: Investment Risks and How to Mitigate Them
• Part 7: The Worst-Case Scenario and How to Avoid It

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 .

For example, the company’s stock price is $100, but you believe it’s worth only $50 because it’s about to report earnings 80% lower than expectations.

Therefore, you recommend shorting the stock. You also recommend purchasing call options at an exercise price of $125 to limit your losses to 25% if the stock moves in the opposite direction.

In an equity research report, you’ll still express a view of the company that’s different from the consensus, but your view won’t be dramatically different.

You’ll spend more time on the Company Background and Valuation sections, and far less time and space on the Catalysts and Risk Factors. And you won’t even write a Worst-Case Scenario section.

If a company seems overvalued by 50%, a research analyst would probably write a “Hold” recommendation, say that there’s “uncertainty around several customers,” and claim that the company’s current market value is appropriate.

Oh, and by the way, one risk factor is that the company might report lower-than-expected earnings.

The Four Main Differences in Equity Research Reports

The main differences are as follows:

1) There’s More Emphasis on Recent Results and Announcements

For example, how does a recent product announcement, clinical trial result, or earnings report impact the company?

You’ll almost always see recent news and updates on the first page of a research report:

These factors may play a role in hedge fund stock pitches as well, but more so in short recommendations since timing is more important there.

2) Far-Outside-the-Mainstream Views Are Less Common

One comical example of this trend is how all 15 equity research analysts covering Enron rated it a “buy” right before it collapsed :

Sell-side analysts are far less likely to point out that the emperor has no clothes than buy-side analysts.

3) Research Reports Give “Target Prices” Rather Than Target Price Ranges

For example, the company is trading at $50.00 right now, but we expect its price to increase to exactly $75.00 in the next twelve months.

This idea is completely ridiculous because valuation is always about the range of possible outcomes, not a specific outcome.

Despite horrendously low accuracy , this practice continues.

To be fair, many analysts do give target prices in different cases, which is an improvement:

4) The Investment Thesis, Catalysts, and Risk Factors Are “Looser”

These sections tend to be “afterthoughts” in most reports.

For example, the bank might give a few reasons why it expects the company’s share price to rise: the company will capture more market share than expected, it will be able to increase its product prices more rapidly than expected, and a competitor is about to go bankrupt.

However, the sell-side analyst will not tie these factors to specific share-price impacts as a buy-side analyst would.

Similarly, the report might mention catalysts and investment risks, but there won’t be a link to a specific valuation impact from each factor.

So the typical stock pitch logic (“We think there’s a 50% chance of gaining 80% and a 50% chance of losing 20%”) won’t be spelled out explicitly:

Your Sample Equity Research Reports

To illustrate these concepts, I’m sharing two equity research reports from our financial modeling courses :

The first one is from the valuation case study in our Advanced Financial Modeling course , and the second one is from the main case study in our Bank Modeling course .

These are comprehensive examples, backed by industry data and outside research, but if you want a shorter/simpler example you can recreate in a few hours, the Core Financial Modeling course has just that.

In each case, we started by creating traditional HF/AM stock pitches and valuations and then made our views weaker in the research reports.

The Typical Sections of an Equity Research Report

So let’s briefly go through the main sections of these reports, using the two examples above:

Page 1: Update, Rating, Price Target, and Recent Results

The first page of an “Update” report states the bank’s recommendation (Buy, Hold, or Sell, sometimes with slightly different terminology), and gives recent updates on the company.

For example, in both these reports we reference recent earnings results from the companies and expectations for the next fiscal year:

We also give a “target price,” explain where it comes from, and give our estimates for the company’s key financial metrics.

We mention catalysts in both reports, but we don’t link anything to a specific valuation impact.

One problem with providing a specific “target price” is that it must be based on specific multiples and specific assumptions in a DCF or DDM.

So with Jazz, we explain that the $170.00 target is based on 20.7x and 15.3x EV/EBITDA multiples for the comps, and a discount rate of 8.07% and Terminal FCF growth rate of 0.3% in the DCF.

Next: Operations and Financial Summary

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.

For a pharmaceutical company like Jazz, you might see revenue by product, pricing and # of patients per product per year, and EBITDA margins.

For a commercial bank like Shawbrook, you might see loan growth, interest rates, interest income and net income, and regulatory capital figures such as the Common Equity Tier 1 (CET 1) and Tangible Common Equity (TCE) ratios:

This section of the report explains how the analyst or equity research associate forecast the company’s performance and came up with the numbers used in the valuation.

The valuation section is the one that’s most similar in a research report and a stock pitch.

In both fields, you explain how you arrived at the company’s implied value, which usually involves pasting in a DCF or DDM analysis and comparable companies and transactions.

The methodologies are the same, but the assumptions might differ substantially.

In research, you’re also more likely to point to specific multiples, such as the 75 th percentile EV/EBITDA multiple, and explain why they are the most meaningful ones.

For example, you might argue that since the company’s growth rates and margins exceed the medians of the set, it deserves to be valued at the 75 th percentile multiples rather than the median multiples:

Investment Thesis, Catalysts, and Risks

This section is short, and it is more of an afterthought than anything else.

We do give reasons for why these companies might be mis-priced, but the reasoning isn’t that detailed.

For example, in the Shawbrook report we state that the U.K. mortgage market might slow down and that regulatory changes might reduce the market size and the company’s market share:

Those are legitimate catalysts, but the report doesn’t explain their share-price impact in the same way that a stock pitch would.

Finally, banks present Investment Risks mostly so they can say, “Well, we warned you there were risks and that our recommendation might be wrong.”

By contrast, buy-side analysts present Investment Risks so they can say, “There is a legitimate chance we could lose 50% – let’s hedge against that risk with options or other investments so that our fund does not collapse .”

How These Reports Both Differ from the Corresponding Stock Pitches

The Jazz equity research report corresponds to a “Long” pitch that’s much stronger:

• We estimate its intrinsic value as $180 – $220 / share , up from $170 in the report.
• We estimate the per-share impact of each catalyst: price increases add 15% to the share price, more patients from marketing efforts add 10%, and later-than-expected generics competition adds 15%.
• We also estimate the per-share impact from the risk factors and conclude that in the worst case , the company’s share price might decline from $130 to $75-$80. But in all likelihood, even if we’re wrong, the company is simply valued appropriately at $130.
• And then we explain how to hedge against these risks with put options.

The same differences apply to the Shawbrook research report vs. the stock pitch, but the stock pitch there is a “Short” recommendation where we claim that the company is overvalued by 30-50%.

And that sums up the differences perfectly: A Short recommendation with 30-50% downside in a stock pitch turns into a “Hold” recommendation with roughly equal upside and downside in a sell-side research report.

I’ve been harsh on equity research here, but I don’t want to disparage it too much.

There are many positives: You do get more creativity than in IB, it might be better for hedge fund or asset management exits, and it’s more fun to follow companies than to grind through grunt work on deals.

But no matter how you slice it, most equity research reports are watered-down stock pitches.

So, make sure you understand the “strong stuff” first before you downgrade – even if your long-term goal is equity research.

You might be interested in:

• The Equity Research Analyst Career Path: The Best Escape from a Ph.D. Program, or a Pathway into the Abyss?
• Private Equity Regulation : 2023 Changes and Impact on Finance Careers
• Stock Pitch Guide: How to Pitch a Stock in Interviews and Win Offers

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street . In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

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Read below or Add a comment

15 thoughts on “ What’s in an Equity Research Report? ”

Hi Brian, what softwares are available to publish Research Reports?

We use Word templates. Some large banks have specialized/custom programs, but not sure how common they are.

Is it possible if you can send me a template in word of an equity report? It will help the graduate stock management fund a lot at Umass Boston.

We only have PDF versions for these, but Word should be able to open any PDF reasonably well.

Do you also provide a pre constructed version of an ER in word?

We have editable examples of equity research reports in Word, but we generally only share PDF versions on this site.

Hey Brian Can you please help me with coverage initiated reports on oil companies. I could not find them on the net. I need to them to get equity research experience, after which only I will be able to get into the field. I searched but reports could not be found even for a price. Thanks

We have an example of an oil & gas stock pitch on this site… do a search…

https://mergersandinquisitions.com/oil-gas-stock-pitch/

Beyond that, sorry, we cannot look for reports and then share them with you or we’d be inundated with requests to do that every day.

No worries. Thanks!

Hi! Brian! Do u know how investment bankers design and layout an equity research? the software they use. like MS Word, Adobe Indesign or something…? And how to create and layout one? Thanks

where can I get free equity research report? I am a Chinese student and now study in Australia. Is the Morning Star a good resource for research report?

Get a TD Ameritrade to access free reports there for certain companies.

How do you view the ER industry since the trading commission has been down 50% since 2007. And there are new in coming regulation governing the ER reports have to explicitly priced and funds need to pay for the report explicity rather than as a service comes free with brokerage?

In addition the whole S&T environment is becoming highly automated.

People have been predicting the death of equity research for over a decade, but it’s still here. It may not be around in 100 years, but it will still be around in another 10 years, though it will be smaller and less relevant.

Yes, things are becoming more automated, but the actual job of an equity research analyst or associate hasn’t changed dramatically. A machine can’t speak with investors to assess their sentiment on a company – only humans can do that.

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Equity Research Report

Step-by-Step Guide to Understanding an Equity Research Report (with Template)

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What is Equity Research Report?

Sell-side equity research analysts primarily communicate their investment thesis and perspective on the outlook of a publicly-traded company through the publication of equity research reports.

In the following guide, we’ll describe the typical components of a research report and illustrate the real-world application of these reports with regard to the buy side and sell side.

Table of Contents

What are the Different Types of Equity Research Reports?

Equity research report ratings (buy, sell, and hold), jp morgan equity research report example (pdf), how is an equity research report structured.

Equity research reports are usually available for a fee through financial data providers.

Barring a new company initiation or an unexpected event, equity research reports tend to immediately precede and follow a company’s quarterly earnings announcements.

That’s because quarterly earnings releases tend to be catalysts for stock price movements, as earnings announcements likely represent the first time in 3 months that a company provides a comprehensive financial update.

Of course, research reports are also released immediately upon a major announcement like an acquisition or a restructuring .

Additionally, if an equity research analyst initiates coverage on a new stock, he/she will likely publish a comprehensive initiation piece.

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Equity research reports are one of several types of key documents analysts have to gather before diving into a full-scale financial modeling project.

Why? The research reports contain estimates used widely by investment bankers to help drive the assumptions underpinning 3-statement models and other models commonly built on the sell side .

On the buy side , equity research is also widely used. Like investment bankers, buy-side analysts find the insights in sell-side equity research reports helpful. However, equity research is used to help the buy side professional understand the “street consensus,” which is important for determining the extent to which companies have an unrealized value that may justify an investment.

The three main types of ratings ascribed by equity research analysts are the following:

• “Buy” Rating → If an equity research analyst marks a stock as a “Buy”, the rating is a formal recommendation that upon analyzing the stock and the factors that drive price movements, the analyst has determined the stock is a worthwhile investment. The markets tend to interpret the rating as a “Strong Buy”, especially if the report’s findings resonate with investors.
• “Sell” Rating → In order to preserve their existing relationships with the management teams of publicly traded companies, equity analysts must strike the right balance between releasing objective analysis reports (and recommendations) and maintaining an open dialogue with the company’s management team. That said, a “Sell” rating is rather uncommon in occurrence because the market is aware of the relationship dynamics (and will interpret it as a “Strong Sell”). Otherwise, the analyst’s rating can be framed to not cause a steep decline in the market share price of the underlying company, while still releasing their findings to the public.
• “Hold” Rating → The third rating, a “Hold”, is fairly straightforward as it indicates that the analyst concluded that the projected performance of the company is in line with either its historical trajectory, industry comparable companies, or the market as a whole. In other words, there is a lack of a catalyst event that could cause a substantial swing — either up or down — in the share price. As a result, the recommendation is to continue to hold and see if any notable developments emerge, but regardless, continuing to hold the stock not too risky and minimal volatility in pricing should be anticipated in theory.

In addition, two other common ratings are “Underperform” and “Outperform”.

• “Underperform” Rating → The former, an “Underperform”, indicates the stock may lag behind the market, but the near-term slowdown does not necessarily mean that an investor should liquidate their positions, i.e. a moderate sell.
• “Outperform” Rating → The latter, an “Outperform”, is a recommendation to buy a stock because it appears likely to “beat the market.” However, the anticipated excess return above the market return is proportionally minor; hence, the “Buy” rating was not offered, i.e. a moderate buy.

Use the form below to download a research report from JP Morgan by the analyst covering Hulu.

Equity Research Report | JP Morgan Hulu (PDF)

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A full equity research report, as opposed to a short one-page “note”, usually includes the following sections:

• Investment Recommendation  ➝ The equity research analyst’s investment rating
• Key Takeaways  ➝ A one-page summary of what the analyst thinks is about to happen (ahead of an earnings release) or his/her interpretation of the key takeaways from what has just happened (immediately after the earnings release)
• Quarterly Update  ➝ Comprehensive detail about the preceding quarter (when a company has just reported earnings)
• Catalysts  ➝ Details about the company’s near-term (or long-term) catalysts that are developing are discussed here.
• Financial Exhibits ➝ Snapshots of the analyst’s earnings model and detailed forecasts
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Here’s How to Write an Equity Research Report: The Best Guide

October 17, 2016

Equity Research is a rewarding career.

To keep up, you need a strong foundation with the judgment to think critically, act independently, and be relentlessly analytical.

That’s why I wrote this guide — to empower you with the equity research(ER) report writing skills to stay ahead in the equity research career.

There is almost NO guide available that teaches you how to write an equity research report.

From textbooks to online video tutorials, you can check and let me know if you find one.

And, I felt that I should write a detailed and step-by-step guide— a guide that really starts at the beginning to equip already-intelligent analysts with a healthy balance of conceptual and practical advice.

The Advanced Guide to Equity Research Report Writing takes your writing to the next level.

Who Is This Guide for?

I wrote this guide for an audience of equity research analysts , investment banking professionals, industry analysts, market research professionals, business management students, and freelance writers.

Most of all, I want you to walk away from this guide feeling confident about your equity report writing skill.

What Is an Equity Research Report

This chapter explains what exactly an ER report is.

The questions like—Who makes it? Who reads and uses it? What are the different types of equity research reports?—are answered clearly and elaborately.

It briefly talks about the various key contents of an ER report.

And lastly, it explains the need to provide a disclaimer at the end of an ER report.

So before understanding how to write an ER report, let’s try to understand what exactly an equity ER is.

FINRA , the Financial Industry Regulatory Authority, defines an equity research report, in Rule 2711 (a)(8) as,

 “A written or electronic communication that includes an analysis of equity securities of individual companies or industries , and that provides information reasonably sufficient upon which to base an investment decision.

Readers of Equity Research, more so than anything else, identify trends that make investment decisions easier to justify.

In simpler words, equity research is a document written and published by a brokerage house or securities firm for its clients to help them to make better decisions regarding which stocks to choose for profitable investment.

The report should be such that it should convince the client to make a decision.

The report should be crisp; the point of view should be clearly structured and articulated concisely.

In the investment industry, equity reports usually refer to ‘sell-side’ research, or investment research created by brokerage houses.

Such research is circulated to the corporate and retail clients of the brokerage house that publishes it.

Research produced by the ‘buy-side’, which includes mutual funds, pension funds, and portfolio managers, is usually for internal use and is not distributed to outside parties.

a. Different types of equity reports

In the above paragraph, we saw terms such as ‘sell-side’ and ‘buy-side’.

Let’s quickly understand what these terms mean:

There are two main types of equity research reports:

i. Sell-Side reports

Sell-side reports are the most common type of equity research reports in circulation.

They are normally produced by investment banks , typically for their clients to guide their investment decisions.

A sell-side analyst works for a brokerage firm or bank which manages individual clients and makes investment recommendations to them.

Sell-side analysts issue the often-heard recommendations of “buy”, “hold”, “neutral”, or “sell”.

These recommendations help clients make decisions to buy or sell stocks.

This is favourable for the brokerage firm as each time a client takes a decision to trade; the brokerage firm gets a commission on the transactions.

Click here to see some examples of sell-side reports

ii. Buy-Side reports

The ‘buy-side’ reports are internal reports, produced for the bank itself, and are guided by differing perspectives and motivations.

A buy-side analyst generally works for a mutual fund or a pension fund company.

They perform research and make recommendations to the money managers of the fund that hires them.

Buy-side analysts will verify how promising an investment seems and how well it fits with the fund’s investment strategy.

These recommendations are made exclusively for the benefit of the fund that employs them and is not available to anyone outside the fund.

Within the buy/sell group, there are other types of reports like initiating coverage reports, standard reports, Issue reports, Investor notes, and sector reports.

iii. Initiating coverage reports

The initiating coverage reports are conducted on firms that the bank has begun following and are typically more comprehensive in nature.

Initiating coverage reports analyze a company’s historical financial information, order books, efficiency, SWOT, cash-flows, and future earning potential, basis which it estimates the future earnings of the company and its P/E multiples.

Click here to see some examples of initiating coverage reports

iv. Standard reports

After an initiating report is produced standard reports will follow for as long as the brokerage house continues to track the stock.

Stocks that are tracked are typically part of an index like the SENSEX or are amongst the top stocks in an industry as these are the stocks that investors care about and are traded in larger volumes.

v. Issue reports

These reports are issued when generally companies announce earnings each quarter (Quarterly earnings reports).

vi. Investor notes

These reports are published a few times in between for incremental information and news.

For example – investor conference companies hold a big M&A deal or a major new product announcement from a competitor.

These are usually short-run updates and are typically just quantitative in nature.

vii. Sector reports

A sector report is a document that evaluates a given industry and the companies involved in it.

It is often included as part of a business plan and typically seeks to establish how one company can gain an advantage in industry through detailed research on competition, products, and customers.

Click here to download the sector report

b. Contents of an equity research report

Now that we have understood the different types of equity research reports, let’s try to see the contents of an ER report.

An ER report should not be more than 10 to 15 pages long and should be very crisp and concise.

It should give the reader a clear understanding of the opinion of the analyst writing the report.

An ER report typically has the following contents:

1. Analyst opinion and summary

2. Key highlights of the company

3. A snapshot of the industry

4. Financial ratio analysis

5. Financial Modeling and Valuation analysis

6. Risk factors

7. Disclosure and rationale of rating

Usually, most of the equity research reports have this information; however, there is no hard and fast rule in which an ER report should be written.

We will study in detail (with examples) how to write each of these segments of an ER report in the forthcoming chapters.

c. Importance of Disclaimers in Analyst Reports

As every ER report is an investment document, and investors use it to make decisions for buying or selling securities based on it, it is important for the report to have certain disclaimers to show un-biases of the analyst writing the report.

Some typical disclaimers are as follows:

• Every ER report entirely reflects views and personal opinions of the analyst as on the date of publication
• The equity research analyst does not have an interest in the shares of the company
• Compensation of the analyst is not linked directly to any specific research recommendations contained in the report

Financial Analysts or equity research analysts working in brokerage firms or sell-side analysts write equity research reports.

Equity research report writing process

Equity Research Report writing

After completing the fundamental analysis, financial statement analysis, ratio analysis, and valuation, the last part of the equity research process is writing equity research reports.

As an equity research analyst, you need to analyze the industry and the company first and then write the stock research report.

This step is paramount in your equity research analysis career .

This is important to write the equity research reports in such a way that your clients understand every word of it.

It’s also important to include relevant analysis that you’ve done in the report.

How to write a report

Let’s see each step of writing an equity research report in detail.

1. Company fundamental analysis

a) Macroeconomic Analysis

b) Checking public information of the company

c) Discussion/ interviews with company management

d) Prepare a 5-year cash flow model and earnings forecast model

e) Review your operational and financial assumptions

f) Assess management and competitive environment, buyers, suppliers, substitutes, porter 5-forces model that tells you the competitive advantage of the company.

2. Company valuation analysis

1. Use intrinsic valuation—Discounted Cash Flow(DCF) method

2. Relative valuation

3. sum-of-the-parts valuation method, wherever required.

Pointers for writing equity research reports

I’ve created a list of pointers purely based on my experience and observations and a bit of research about dos and don’ts while writing an equity research report.

1. A clear view of the company

Before writing the report, have a clear view of the company in terms of—Investment rationale, risk assessment, key growth drivers, cost drivers, and revenue drivers.

2. Recommendation/Rating

Clearly write the company’s name at the top of the report and mention your recommendation—buy, sell, hold.

You can also use the words—outperform, underperform, neutral or accumulate based on your valuation.

Have an image of an equity research report in your mind, and so you won’t miss these details.

Usually, there are templates available in your company and you need to write the report using these templates.

3. Target price

You need to mention the target price based on your valuation along with the recommendation.

4. Investment rationale

Write clearly your investment rationale. Why do you think the share price will go up/down?

5. Share price chart

Include a price chart of the stock that will show the last 52-weeks’ share price movement.

6.Business model

Mention the analysis of the company’s business model and how will it perform in the next 2-3 years.

7. Key ratio analysis

Include important ratio analysis of the company and 52-week high-low share price on a stock exchange.

Include market capitalization, Enterprise Value(EV), Earnings Before Interest Tax and Depreciation (EBITDA), EV/EBITDA, and dividend yield (%)

8. Product profile and segments

Analyze the company’s product profile, its various segments, and brands. Include current sales and forecasted revenue figures, cost, market size, company’s market share, competition, the company’s performance in domestic and other markets.

9. Economy-Industry-Company (E-I-C) Analysis

Cover the company’s fundamental analysis with supportive data.

10. Intrinsic and relative valuation

Perform DCF analysis and relative valuation. Relative valuation should be done with the company’s peers on the basis of Price-Earnings ratio (P/E), Price to Book ratio (P/B), Price to Sales (P/S), Return on Equity (ROE) and Return on Capital Employed (ROCE).

11. Reasoning for recommendation

Write proper reasoning for your recommendation. For example—Why buy the stock or why not to buy the stock. So, your reasoning has to be strong.

12. Unlock the value

Write what can unlock/increase/reduce the value of the company .

13. Legal matters

If the company is battling any case, write what could be its effects on the stock price.

14. Common industry points

While writing industry reports, write the points which are common for all players in the industry, for example, regulatory limitation, excise duty, oil prices, etc.

15. Covering all the areas in an equity research report

While writing the equity research report, assume that the reader is new to the company and he doesn’t have any idea about its business.

So, your report should include precise information about—product, financials, management, market, future plans of the company, growth estimates, and the risk factors of the company.

In short, as an equity research analyst, your equity analysis report writing process should be structured and you should follow the dos and don’ts mentioned in this post.

Sample equity research reports (PDFs):

The Walt Disney Company

If you have any queries, Speak Your Mind.

Key Takeaways

• Equity research report writing is a skill . You need to build this skill to go to the next level in your career . Top-notch careers in finance–equity research, investment banking , asset management, financial research, Knowledge Process Outsourcing (KPO) units value this skill in high regard.
• There are different types of research reports–sell-side, buy-side, initiating coverage, standard, issue, investor notes, and sector reports. As an analyst, you should know all these reports.
• Contents of an equity research report include Analyst opinion and summary, Key highlights of the company,  A snapshot of the industry, Financial and ratio analysis, Valuation analysis, Risk factors, and Disclosure and rationale of rating. I’m going to cover all these sections in detail with examples in the coming chapters.

Now You Try It

I hope you can see the potential of equity research report writing skills for your career.

Yes, it takes hard work to create something great.

But with this skill, you already know ahead of time that your hard work is going to pay off.

I want you to give the skill a try and let me know how it works for you.

If you have a question or thought, leave a comment below and I’ll get right to it.

• Download BIWS Course sample videos here .
• Read Students’ Testimonials here .

Avadhut is the Founder of FinanceWalk. He enjoys writing on Finance Careers topics. Check our Financial Modeling Courses . Contact us for  Career Coaching based on Your Inner GPS.

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How To Do Equity Research: An Actionable Guide

ContentsWho Is This Guide for?What Is an Equity Research Reporta. Different types of equity reportsi. Sell-Side reportsii. Buy-Side reportsiii. Initiating coverage reportsiv. Standard reportsv. Issue reportsvi. Investor notesvii. Sector reportsb. Contents of an equity research reportc. Importance of Disclaimers in Analyst ReportsEquity research report writing processHow to write a report1. Company fundamental analysis2. Company valuation analysisPointers for writing equity research reports1. A clear view of the company2. Recommendation/Rating3. Target price4. Investment rationale5. Share price chart6.Business model7. Key ratio analysis8. Product profile ...

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The Value of Equity Research

Equity research is an invaluable asset for anyone looking to stay up-to-date on market and industry trends. In this guide, you will learn about the type of information contained in equity research, the value it offers to corporate professionals, and how the most advanced teams are already leveraging the expertise of Wall Street’s top analysts to inform critical business decisions.

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Introduction.

Equity research, which forms a multi-billion dollar industry for investment banks, is produced by thousands of analysts worldwide to provide the market with valuable information on companies, industries, and market trends. Today, over 90% of equity research is consumed by fund managers, who have the Wall Street relationships to acquire it and the analyst resources to mine it for insights. For corporate strategy professionals who lack this access, however, equity research has historically been challenging to obtain and navigate.

To help corporations circumvent these challenges, AlphaSense has introduced Wall Street Insights, the first and only equity research collection purpose-built for the corporate user. Through the AlphaSense platform, any business making strategic plans or product decisions, conducting competitive analysis, evaluating M&A, or engaging in investor relations can now tap into the deep industry expertise of Wall Street’s top analysts.

What is Equity Research?

Equity research is developed by sell-side firms to help investors and hedge fund managers discover market opportunities and make informed investment decisions. Increasingly, this expert analysis has also been identified by forward-looking corporations as a highly valuable tool to inform strategic decision-making.

There are thousands of sell-side firms that employ expert analysts around the globe to write equity research for the market. The majority of firms producing equity research are hyper-focused and only have one or two analysts developing reports on a specific industry. However, larger firms, such as Morgan Stanley and Bank of America, collectively employ thousands of analysts to write reports on thousands of public companies–covering everything from TMT giants to niche products.

Equity research analysts are deep subject matter experts who are often former executives, industry veterans, or academics. These analysts conduct in-depth research and publish reports on corporations, industries, and macro trends, offering an expert lens into a subject.

Historically, over 90% of equity research was consumed by buy-side fund managers, who had the Wall Street relationships to acquire it and the analyst resources to mine it for insights. For buy-side professionals, equity research is a critical tool to inform sound investment decisions backed by expert insights.

Today, equity research is increasingly relied upon by corporate teams as a high-value source of information. These teams leverage equity research to make strategic business plans, conduct competitive analysis, evaluate mergers and acquisitions, and make product and marketing decisions. For corporations, the value of equity research lies in the detailed coverage of their company, their competitors, and how they are performing related to the marketplace they are within.

What is an Equity Research Report?

An equity research report is a document prepared by an equity research analyst that often provides insight on whether investors should buy, hold, or sell shares of a public company. In an equity research report, an analyst lays out their recommendation, target price, investment thesis, valuation, and risks.

There are multiple forms of equity research, including (but not limited to):

An update report that highlights the latest news, company announcements, earnings reports, Buy Sell Hold ratings, M&A activity, anything that impacts the value of the company.

A comprehensive company report that is compiled when an analyst or firm initiates their coverage of a stock. Initiation reports cover all of the divisions and products of a company in-depth to provide a baseline of what the company is and how it is performing. Initiation reports can be tens to hundreds of pages long, depending on the complexity of a company.

General industry updates that cover a group of similar companies within a sector. Industry-specific reports typically dive into additional factors such as loan growth, interest rates, interest income, net income, and regulatory capital.

A report compiled by research firms either daily or weekly. These reports can often be a great place to get more in-depth insight on commodities and also get market opinions from commodity analysts or traders who write the reports.

A quick 1-2 page report that comments on a news release from a company or other quick information

What is Included in a Typical Equity Research Report?

Research reports don’t need to follow a specific formula. Analysts at different investment banks have some latitude in determining the look and feel of their reports. But more often than not, research reports follow a certain protocol of what investors expect them to look like.

A typical equity research report includes in-depth industry research, management analysis, financial histories, trends, forecasting, valuations, and recommendations for investors. Sometimes called broker research reports or investment research reports, equity research reports are designed to provide a comprehensive snapshot that investors or corporate leaders can leverage to make informed decisions.

Here’s a quick overview of what a standard equity research report covers:

This section covers events, such as quarterly results, guidance, and general company updates.

Upgrades/Downgrades are positive or negative changes in an analyst’s outlook of a particular stock valuation. These updates are usually triggered by qualitative and quantitative analysis that contributes to an increase or decrease in the financial valuation of that security.

Estimates are detailed projections of what a company will earn over the next several years. Valuations of those earnings estimates form price targets. The price target is based on assumptions about the asset’s future supply & demand and fundamentals.

Management Overview and Commentary helps potential investors understand the quality and makeup of a company’s management team. This section can also include a history of leadership within the company and their record with capital allocation, ESG, compensation, incentives, stock ownership. Plus, an overview of the company’s board of directors.

This section covers competitors, industry trends, and a company’s standing among its sector. Industry research includes everything from politics to economics, social trends, technological innovation, and more.

Historical Financial Results typically cover the history of a company’s stock, plus expectations based on the current market and events surrounding it. To determine if a company is at or above market expectations, Analysts must deeply understand the history of a specific industry and find patterns or trends to support their recommendations.

Based on the market analysis, historical financial results, etc., an analyst will run equity valuation models. In some cases, analysts will run more than one valuation model to determine the worth of company stock or asset.

Absolute valuation models : calculates a company’s or asset’s inherent value.

Relative equity valuation models : calculates a company’s or asset’s value relative to another company or asset. Relative valuations base their numbers on price/sales, price/earnings, price/cash flow.

An equity research analyst’s recommendation to buy, hold, or sell. The analyst also will have a target price that tells investors where they expect the stock to be in a year’s time.

What Does an Equity Research Analyst Do?

Equity research analysts exist on both the buy-side and the sell-side of the financial services market. Although these roles differ, both buy-side and sell-side analysts produce reports, projections, and recommendations for specific companies and stocks.

An equity research analyst specializes in a group of companies in a particular industry or country to develop high-level expertise and produce accurate projects and recommendations. Since ER analysts generally focus on a small set of stocks (5-20), they become specialists in those specific companies and industries that they evaluate or follow. These analysts monitor market data and news reports and speak to contacts within the companies/industries they study to update their research daily.

Analysts need to comprehend everything about their ‘coverage’ to give investment endorsements. Equity research analysts must be conversant with the business regulations and regime policies within the country to decide how it will affect the market environment and business in general. The more you understand the industries in detail, the easier it will be for you to decipher market dynamics.

One prevalent aspect of an equity research analyst’s job is building and maintaining valuable relationships with corporate leaders, clients, and peers. Equity research is largely about an analyst’s ability to service clients and provide insightful ideas that positively influence their investing strategy.

EQUITY RESEARCH ANALYSTS:

• Analyze stocks to help portfolio managers make better-informed investment decisions.
• Analyze a stock against market activity to predict a stock’s outlook.
• Develop investment models and provide trading strategies.
• Provide expertise on markets and industries based on their competitive analysis, business analysis, and market research.
• Use data to model and measure the financial risk associated with particular investment decisions.
• Understand the details of various markets to compare a company’s and sector’s stock

Buy-Side vs. Sell-Side Analysts

Although the roles of buy-side and sell-side analysts do overlap in some respects, the purpose of their research differs.

How Do Corporates Currently Access Equity Research?

If you were to Google “equity research reports,” you would not get access to equity research, earnings call transcripts or trade journals. You would, however, discover an unmanageable amount of noise to sift through.

Accessing equity research reports is highly dependent on relationships and entitlements, particularly for corporate teams. Unlike financial firms and investor relations teams, who can access equity research by procuring the right entitlements, corporate teams have a much harder time finding and purchasing high-quality equity research.

If you were to search online for equity research, for example, you would be presented with sub-par options such as:

Some websites allow you to search for research reports on companies or by firms. Some of the reports are free, but you must pay for most of them. Prices range from just $15 to thousands of dollars.

If you want just the bottom-line recommendations from analysts, many sites summarize the data. Nearly all the websites that provide stock quotes also compile analyst recommendations, however, you will only get the big picture and not any of the detailed analysis.

Some independent research providers sell their reports directly to investors. These reports typically include an overview of what a stock’s price could be, plus an analysis of the company’s earnings. These reports often cost less than $100 but can be more.

The majority of equity research is completely unsearchable, which is why AlphaSense’s Wall Street Insights is changing the game for corporations globally. Now, with WSI, corporations can leverage this high-quality research to augment their understanding of specific companies and industries; plus, AlphaSense’s corporate clients can now conduct more meaningful analysis and make more data-driven decisions.

Real-Time Research : Real-Time research is available to eligible users (based on an entitlement) immediately upon publication by the broker. Financial Services users with entitlements are the primary consumers of real-time research, while some Corporate professionals are also eligible. Payment for real-time research is made directly from clients to brokers through trading commissions or hard dollar agreements.

Aftermarket Research : Aftermarket research is a collection of many of the same documents as the real-time collection, but it is available after a zero to fifteen-day delay. Investment bankers, consultants, and corporate users are the primary consumers of Aftermarket research.

What is Wall Street Insights?

Wall Street Insights is the first and only equity research collection purpose-built for the corporate market, providing corporations unprecedented access to a deep pool of equity research reports from thousands of expert analysts.

Through partnerships with Morgan Stanley, Bank of America, Barclays, Bernstein, Bernstein Autonomous, Cowen, Deutsche Bank, Evercore ISI, HSBC, and others, corporate professionals can now access the world’s most revered equity research, indexed and searchable in the AlphaSense platform.

From macro market trends and industry analyses to company deep-dives, the Wall Street Insights content collection provides corporate professionals with a 360-degree view of every market. With the valuable expertise of thousands of analysts on your side, corporate teams can quickly compare insights, validate internal assumptions, and generate new ideas to guide critical business decisions and strategies.

In terms of search and accessibility, Wall Street Insights is the first of its kind. Not only does AlphaSense offer hard-to-find equity research reports, but we also provide a robust and seamless search experience.

What Research Do You Get Access to with WSI?

Get access to the world’s leading equity research with Wall Street Insights. Download the e-book to learn more about equity research from Morgan Stanley, Barclays, Bernstein, Deutsche Bank, and more.

“We are delighted to partner with AlphaSense to expand access to Morgan Stanley’s global research platform,” says Simon Bound, Global Head of Research at Morgan Stanley. We have over 600 publishing analysts covering companies, industries, commodities, and macroeconomic developments across more than 50 countries. Morgan Stanley will bring corporates a unique perspective from our best in class analysts, a global platform, and a collaborative culture that enables us to unravel the most complex market and industry trends.”

How Can Companies Leverage Equity Research?

Discover how the world’s most innovative companies leverage Wall Street Insights to make critical business decisions every day. Download the e-book to read real case studies from a Corporate Development team and a Corporate Strategy team.

“AlphaSense’s corporate users are typically Corporate Strategy, Corporate Development, and Investor Relations professionals. Today, thousands of enterprises rely on equity research to power data-driven decision making. These teams leverage equity research reports to:”

• Create investment ideas
• Monitor peers in real-time (and discover what equity research is being produced about them)
• Model and evaluate companies (for M&A or general benchmarking)
• Dive deep into customers, partners, and prospects
• Get up-to-speed quickly on specific industry trends
• Prepare for earnings season

Ready to explore the world’s leading equity research

All About Equity Research [The ONLY Guide You’ll Need in 2024]

Equity research is a key pillar in the world of finance that bridges the gap between companies, investors, and the market . In this guide, we will delve deep into the world of equity research, exploring its purpose, the process, the roles involved, and the skills required to succeed in this field.

We’ll also discuss the types of equity research, dissect the intricacies of equity research reports, and shed light on the exciting job opportunities this sector offers. Furthermore, we will touch upon the evolving trends in equity research and how they’re shaping the industry’s future.

Let’s get started-

What Is Equity Research?

In the world of finance, ‘equity’ refers to the ownership of assets after all debts associated with those assets are paid off. In simpler terms, if you were to sell all of your company’s assets and pay off its debts, the leftover money would represent your company’s equity. Hence, equity research is an in-depth analysis of a company’s total equity or value.

But equity research isn’t just a mere calculation of assets and liabilities. It’s a rigorous, methodical examination of all the aspects that contribute to a company’s financial performance, and thus, its equity. It is akin to a detective’s investigation, digging through layers of financial statements, market trends, sector overviews, and macroeconomic factors to arrive at a comprehensive understanding of a company’s financial standing and future prospects.

Understanding Equity Research With a Simple Example

Let’s illustrate this with an example. Suppose an equity research analyst is studying a pharmaceutical company . They won’t only look at the balance sheets or profit and loss statements. They’ll consider factors such as the company’s research and development efforts, the potential market for new drugs, any pending patents, the status of regulatory approvals, and even the broader trends in the healthcare industry.

They might investigate how the company performed during different economic conditions, how well its product pipeline compares to competitors, and how regulatory changes could impact future earnings.

The analyst will also look at macroeconomic indicators. For instance, if a new law threatens to increase the cost of a raw material vital to the company’s main product, that could impact the company’s future profitability, and the analyst would need to factor this into their analysis.

At the end of this investigation, the equity research analyst forms an estimation of the company’s intrinsic value, which they then compare to its current market value . If the intrinsic value is significantly higher than the market value, the analyst might recommend the stock as a good buy, as it’s likely undervalued . On the other hand, if the market value is much higher than the intrinsic value, the stock might be overpriced , and the analyst might recommend investors to sell or avoid it.

Equity research, in essence, is this deep dive into the world of a company’s financials , providing a guide to investors, helping them navigate through their investment journey. It’s the compass that points towards profitable investment decisions.

Roles and Responsibilities of an Equity Research Analyst

An Equity Research Analyst acts as a conduit between investors and the ever-dynamic financial markets, providing them with information and insights necessary to make sound investment decisions. Let’s see how their day looks like –

Deep-Dive Research

Their day-to-day responsibilities start with conducting extensive research i nto specific companies or sectors. They meticulously scrutinize financial reports, balance sheets, cash flow statements, and earnings releases. However, their research isn’t limited to mere numbers. They also keep tabs on industry trends, regulatory changes, and macroeconomic factors that could impact the companies they are following.

Example – An analyst is covering technology companies, they need to be abreast of developments like privacy legislation, advancements in artificial intelligence, or shifts in consumer behavior towards tech products. This requires constant learning and staying updated with news and trends in the sector.

Financial Modelling and Valuation

Equity Research Analysts are also adept at creating complex financial models . They use these models to project future earnings , based on various potential scenarios. Based on these projections, they calculate the intrinsic value of a company’s shares.

Example – Let’s say there’s an auto company that’s planning to launch a new electric car model. An Equity Research Analyst covering this company would build a financial model to estimate additional revenues from this new model, the costs associated with its production, the potential impact on the company’s market share, and so on. They would then use these estimates to calculate what this could mean for the company’s future profitability , and how it could impact the company’s share price.

Also Read: All About Financial Modeling [The ONLY Guide You’ll Need in 2024]

Writing Equity Research Reports

One of the key deliverables of an Equity Research Analyst is the Equity Research Report. These reports encapsulate the findings of their research and analysis in a format that’s digestible for investors. The report typically includes

• An overview of the company
• A summary of recent developments
• Detailed financial analysis
• Future projections, and
• Most importantly, an investment recommendation (buy, hold, or sell)

The equity research reports have a broad audience – institutional investors, retail investors, fund managers, and sometimes, the companies themselves. Given the diverse readership, the reports need to be accurate, unbiased, and clear. A well-written report can significantly influence investment decisions, underscoring the responsibility on the analyst’s shoulders.

Communication and Presentation

Finally, an Equity Research Analyst often has to present their findings to clients, fund managers, or within their own organizations. This could be through conference calls, presentations, or even TV interviews. Hence, strong communication skills and the ability to explain complex financial concepts in a simple way are essential traits for an Equity Research Analyst.

The Process of Equity Research

The process of equity research is like peeling back the layers of an onion to reveal the core truth about a company’s financial health and potential. It involves multiple steps, each equally important in creating a well-rounded view of the company.

Step 1: Selection of Companies

The first step in equity research is the selection of companies. Analysts often specialize in specific sectors or industries , such as technology, healthcare, or energy. The choice of companies to analyze within those sectors depends on several factors, including market capitalization, relevance in the industry, or particular events like mergers or IPOs.

Step 2: Industry Analysis

After choosing the companies, analysts start with a broad industry analysis . They look at the industry size, growth rate, major competitors, regulatory environment, and key trends. This macro view provides context for the company’s operations and potential growth.

Step 3: Company Analysis

Once they’ve understood the industry context, analysts move onto detailed company analysis. This involves a deep dive into the company’s financial statements, including balance sheets, income statements, and cash flow statements. They also examine the company’s business model, products or services, competitive positioning, management quality, and corporate governance practices.

Step 4: Financial Modelling and Projections

After developing an in-depth understanding of the company, analysts use this information to build detailed financial models. These models involve projections of the company’s future revenues, expenses, and earnings, often under different scenarios. For example, they might project how the company’s earnings could be affected under different economic conditions or if a new product line succeeds or fails.

Step 5: Valuation

The next step is the valuation, where analysts use techniques such as Discounted Cash Flow (DCF) analysis, Price/Earnings (P/E) ratio, or Comparables analysis to estimate the intrinsic value of the company’s shares . This value is then compared with the current market price to determine whether the company’s shares are undervalued or overvalued.

Step 6: Report Writing and Recommendation

Finally, analysts compile their research findings, financial model outputs, and valuation results into a comprehensive equity research report . The report also includes a recommendation, typically a ‘buy’, ‘hold’, or ‘sell’ for the company’s stock based on the analyst’s analysis.

It’s important to note that equity research is a continuous process . Companies release financial information quarterly, industry trends evolve, and macroeconomic conditions change. Therefore, analysts regularly update their reports to reflect the most recent data and insights.

Key Aspects of Equity Research Reports

An Equity Research Report is a comprehensive document that encapsulates an analyst’s view of a company, sector, or industry . These reports are essential tools that investors use to understand and navigate the financial markets. Here are the key aspects of an equity research report:

Executive Summary

Every report begins with an executive summary that provides a brief overview of the analyst’s findings and recommendations. This part is designed to provide a quick snapshot of the key takeaways from the report.

Company Overview

This section provides a detailed description of the company , including its history, management, product or service offerings, and business model. It also includes an overview of the company’s key strategies and competitive advantages. This information helps readers understand the company’s operations and its position within its industry.

Industry Overview

The industry overview offers an analysis of the broader sector or industry in which the company operates. It covers aspects such as industry size, growth rates, key trends, major competitors, and regulatory environment . This context is crucial in understanding the company’s potential for growth and the challenges it might face.

Financial Analysis

In this part of the report, the analyst presents their detailed analysis of the company’s financials. This usually includes examination of the i ncome statement, balance sheet, and cash flow statement. The analyst may also discuss financial ratios, growth rates, profitability metrics, and other key financial indicators. This section provides insights into the company’s financial health and performance.

Financial Projections and Valuation

The heart of the equity research report is the financial projections and valuation section. Here, the analyst lays out their forecasts for the company’s future earnings and financial performance. They also present their valuation of the company’s stock, typically arrived at using financial modelling techniques like Discounted Cash Flow (DCF), Price/Earnings (P/E) ratio, or Comparables analysis.

Investment Thesis and Recommendations

In the final section, the analyst presents their investment thesis – their argument for why an investor should or should not invest in the company’s stock. They also provide a clear investment recommendation, typically a ‘buy’, ‘hold’, or ‘sell’ rating. This section is the culmination of all the analyst’s research and analysis.

Types of Equity Research

Equity research is carried out by different types of institutions for various purposes . Understanding the differences among them can help in comprehending the perspectives and potential biases in the research. Here are the key types of equity research:

Sell-Side Equity Research

Sell-side analysts work for brokerage firms and investment banks. Their research is primarily aimed at selling securities, providing investment recommendations, and facilitating transactions , which helps their companies earn brokerage and transaction fees. Sell-side research is generally freely available, and the firms distribute it widely to attract business from institutional and retail investors.

Buy-Side Equity Research

Buy-side analysts work for institutional investors such as mutual funds, hedge funds, pension funds, and insurance companies. They conduct research to assist the fund’s managers in making investment decisions for the fund’s portfolio. Their research is typically proprietary and is used solely for the benefit of the fund that employs them.

Independent Equity Research

Independent equity research firms are third-party entities that aren’t directly involved in trading securities. They sell their research to hedge funds, asset managers, and sometimes individual investors . Since these firms don’t have a trading department and aren’t seeking investment banking business, their research is perceived as unbiased. They have gained popularity over the past decade due to their perceived objectivity.

Internal Equity Research

Large corporations often have their internal equity research teams. These analysts perform research on competitors, suppliers, and customers to assist in strategic decision-making. This research is generally not available to the public as it is used for internal corporate strategy and planning purposes.

Each type of equity research has its strengths and weaknesses , and they all play essential roles in the financial ecosystem. Understanding their differences and potential biases can help investors and decision-makers use this research more effectively.

Skills Required for a Career in Equity Research

Equity research is a challenging and intellectually demanding field that requires a combination of hard and soft skills. If you’re considering a career in equity research, here are the key skills you’ll need to succeed:

Financial Literacy

A fundamental understanding of financial principles is the bedrock of equity research. This includes knowledge of financial accounting, corporate finance, economics, and statistics . Analysts need to be comfortable reading and interpreting financial statements, calculating financial ratios, and understanding economic indicators.

Analytical Skills

Equity research involves extensive data analysis. Analysts need to sift through large volumes of data, spot trends, interpret complex information , and draw meaningful conclusions. Strong analytical skills are crucial to understand the past performance of a company and make accurate forecasts about its future.

Financial Modelling

Financial modelling is an essential tool in an equity researcher’s arsenal. Analysts use financial models to forecast a company’s future revenues and earnings and estimate the intrinsic value of its shares. Proficiency in Excel and familiarity with valuation techniques such as discounted cash flow (DCF) and comparable company analysis is a must.

Attention to Detail

The devil is often in the details when it comes to equity research. Analysts need to pay close attention to the footnotes in financial statements, the nuances in a CEO’s comments during an earnings call, or the implications of a regulatory change. A small detail can sometimes have a significant impact on a company’s valuation.

Communication Skills

Analysts need to communicate their findings effectively. This includes writing clear, concise research reports that can be understood by people without a financial background. It also involves presenting and defending their views to clients, colleagues, and sometimes, the media. Strong written and verbal communication skills are vital.

Curiosity and Continuous Learning

Equity research analysts need to stay on top of industry trends, economic news, and changes in financial regulations. This requires a natural curiosity and a commitment to continuous learning. An analyst who stops learning risks falling behind in the fast-paced world of finance.

Job Opportunities in Equity Research

Equity research provides a host of job opportunities in a range of firms including investment banks, asset management companies, research firms etc. Let’s understand these roles, their typical responsibilities, average salaries in India, and potential employers:

Equity Research Analyst

As an Equity Research Analyst, you’ll delve deep into company financials, industry trends, and macroeconomic factors to provide investment recommendations. You may focus on a specific sector or cover a broad range of industries. This role involves financial modelling, report writing, and communicating with clients and company representatives.

Average Salary in India : ₹ 7-10 Lakhs per annum Employers : Major employers include JP Morgan, Goldman Sachs, Morgan Stanley, Credit Suisse, Kotak Securities.

Associate Analyst

Those just starting in equity research often begin as Associate Analysts. Working closely with senior analysts, Associates help in collecting data, building financial models, and drafting research reports. It’s a role that provides a solid foundation in the fundamentals of equity research.

Average Salary in India : ₹ 4-6 Lakhs per annum Employers : Firms like Ernst & Young, KPMG, Deloitte, and PwC.

Senior Analyst/Research Director

With experience, an Analyst or Associate can move up to become a Senior Analyst or Research Director. These roles involve more strategic oversight, including deciding which companies or sectors to cover, mentoring junior analysts, and representing the firm to clients, the media, and the public.

Average Salary in India : ₹ 12-20 Lakhs per annum Employers : Multinational banks and brokerage firms like Citigroup, Barclays, ICICI Securities.

Portfolio Manager

Some equity research analysts transition into portfolio management roles over time. As a Portfolio Manager, you would use the insights from equity research to make investment decisions for a fund or portfolio. This role requires a deep understanding of financial markets, risk management, and asset allocation strategies.

Average Salary in India : ₹ 15-25 Lakhs per annum Employers : Asset management companies like HDFC Asset Management, ICICI Prudential, Reliance Nippon Life Asset Management.

Equity Strategist

Equity Strategists work with a macro view, examining factors like economic indicators, industry trends, and market data to provide investment strategies and identify attractive sectors or themes in the market. While less company-specific than an analyst role, strategists still utilize many of the research and analytical skills developed in equity research.

Average Salary in India : ₹ 10-18 Lakhs per annum Employers : Major investment banks and financial services firms like Deutsche Bank, HSBC, UBS.

Investor Relations Role

Equity research analysts can also move into investor relations roles within companies. These professionals communicate with shareholders, analysts, and the broader financial community. Understanding the perspective of equity analysts is valuable in this role since you’ll be communicating key financial and strategic information about the company to the investment community.

Average Salary in India : ₹ 9-15 Lakhs per annum Employers : Large corporations across industries like Tata Group, Reliance Industries, Infosys, Wipro.

Sales & Trading

Some equity research professionals transition into roles in sales & trading. In this capacity, they use their deep knowledge of industries and companies to advise clients on investment strategies, facilitate transactions, and connect buyers and sellers in the financial market.

Average Salary in India : ₹ 8-16 Lakhs per annum Employers : Banks and brokerage firms such as Axis Bank, HDFC Bank, Edelweiss, Sharekhan.

Trends and Future of Equity Research

Equity research, like all facets of finance, is continually evolving in response to changing regulations, technologies, and investor behaviours. Here are some of the current trends and potential future developments in the field:

Digitization and Automation

The digitization of financial information and the development of advanced data analytics tools are transforming the way analysts conduct research. Automated tools are increasingly being used to collect and process data, allowing analysts to focus more on interpreting the data and generating insights.

For example , artificial intelligence (AI) and machine learning (ML) tools are now used to analyze financial statements, track sentiment in news articles and social media, and even to predict future stock price movements.

Increased Regulatory Oversight

In recent years, regulators around the world have been placing increased scrutiny on equity research to promote transparency and prevent conflicts of interest.

For example , the European Union’s MiFID II regulations now require investment firms to separate the costs of research from trading fees. This has led to more demand for independent research and is forcing sell-side firms to demonstrate the value of their research more explicitly.

Demand for ESG Analysis

There’s a growing trend among investors to consider Environmental, Social, and Governance (ESG) factors in their investment decisions. This is leading to increased demand for equity research that includes analysis of companies’ ESG performance. Analysts are now required to assess factors such as a company’s carbon footprint, its labor practices, and its board diversity in addition to its financial performance.

Crowdsourced Equity Research

Crowdsourced equity research platforms, where independent analysts and investors share their research and opinions, are gaining popularity. These platforms offer a wider range of views and analyses than traditional equity research sources. However, they also pose new challenges in terms of verifying the credibility of the information.

Emergence of Alternative Data

Equity researchers are increasingly using alternative data – information derived from non-traditional sources like s ocial media sentiment, satellite imagery, or website traffic data – to gain additional insights into a company’s performance. These data sources can provide real-time indicators that can complement traditional financial data and provide an edge to the analysts.

Equity research serves as a vital link between companies, investors, and the financial markets . It involves detailed analysis of financial data, sector trends, and macroeconomic factors to formulate clear, actionable investment recommendations.

With its varied roles – from Equity Research Analysts to Portfolio Managers, and from Equity Strategists to Investor Relations Roles – this field offers numerous career paths, each with its own unique blend of challenges and rewards.

Whether you’re a finance enthusiast exploring career paths or an investor seeking insights into your investment choices, understanding the nuances of equity research is highly beneficial. So take the leap, dive deep, and explore the rewarding world of equity research!

Frequently Asked Questions

Equity research analysts examine financial data, conduct analyses, build financial models, and write research reports to make investment recommendations.

Skills include strong analytical abilities, understanding of financial markets, proficiency in financial modeling, and excellent communication skills.

CA Yash Jain

Bain & Co. 5000+ Students Trained in the field of Investment Banking, FRM & CFA

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Equity Research Overview

A complete overview of equity research and what it entails

What is Equity Research?

Equity research professionals are responsible for producing analyses, recommendations, and reports on investment opportunities that investment banks , institutions, or their clients may be interested in. The Equity Research Division is a group of analysts and associates at an investment banking ( sell-side ), an institution ( buy-side ), or an independent organization.

The main purpose of equity research is to provide investors with detailed financial analysis and recommendations on whether to buy, hold, or sell a particular investment. 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.

How are Equity Research Divisions Organized?

If you’re looking for a career in equity research,  then it’s important to know that it’s a fairly flat organizational structure (unlike the hierarchy in investment banking) and the two main positions are Associate and Analyst.  Unlike other areas of corporate finance, the Associate position is more junior and the Analyst position is more senior.  Typically, an associate (or multiple associates) work for one Analyst, who has overall responsibility for covering a group of companies.

Analysts are usually divided into industry sectors to cover similar companies within an industry.  Most sectors have a lot of specialized knowledge required, so it makes sense for an analyst to stick to one industry where they can become experts.

Some of the largest sectors in equity research include consumer staples, consumer discretionary, internet, healthcare, energy, mining, technology, and telecommunications.  A team of associates and an analyst will usually cover at least 5 companies and could cover as many as 15, depending on their seniority, the sizes of the companies, and the industry.  More: see our financial analyst guide .

What Do Equity Research Analysts/Associates Do?

The main work in equity research is producing reports.  Ranging from quick updates or “flash reports” to in-depth, “initiating coverage” reports, the job of an equity research associate or analyst is to constantly be publishing. Another big part of the job (discussed below) is financial modeling .

Working in equity research can be compared to what it’s like to be a university student.  There are lots of “assignments” or “papers” due with fairly regular deadlines, such as when a company releases quarterly results or announces something.

The contents of an equity research report typically include:

• Industry research (competitors, trends, etc.)
• Management overview and commentary
• Historical financial results
• Forecasting
• Recommendations

Each of these sections is broken down in more detail below.

Breaking Down an Equity Research Report

Below is an example of the cover of an equity research report from a bank.

1. Industry Research

In this section of an equity research report, there will be lots of information on trends and competition in the industry.  This is where frameworks like Porter’s Five Forces or a PEST analysis can come in handy to ensure that you’ve covered all the dynamics in the industry, including politics, economics, social trends, and technological innovation, to name a few.

2. Management Overview

It’s very important for anyone considering a potential investment in a company to understand the quality of its management team. This is a place where equity research analysts can add real value, since they have direct access to management on quarterly conference calls, “analyst day”, site visits, and other occasions.  Unlike individual investors, they can ask management direct questions about the business, and then do an assessment of their competence and relay that information back to investors.

3. Historical Financial Results

One of the core jobs of equity research is to analyze historical financial results and compare them to the guidance that was given, or compare them to the analyst’s expectations.  The performance of a stock is largely based on reality vs expectations, so it’s important for an analyst to analyze and understand if the actual historical results were below, at, or above market expectations.

To learn these equity research skills, see our financial analysis courses .

4. Forecasting

Forecasting financial results is more of an art than a science.  We’ve written about this extensively in our guides on how to be a good financial analyst , as well as providing a breakdown of financial modeling skills .

To summarize the points in those articles, there are two main ways of forecasting: top-down and bottom-up.

Top-down forecasting looks at the industry-first (its size, growth, pricing, etc.), then determines how much market share a company is likely to have, and finally, works down to revenue.

A bottom-up approach starts with the basic drivers of revenue, such as the number of customers, or the number of units sold, and then works up to a revenue forecast.  Professionals in equity research have to forecast quarterly data (or whatever frequency the company reports, e.g., semi-annually in Europe).

For more on this, see our complete financial modeling guide .

5. Valuation

The only thing that’s more of an art than forecasting is valuation.  Valuation methods take all the assumptions from the forecast and build on them with even more assumptions, such as a valuation multiple and/or a discount rate, both of which are very subjective.  Analysts in equity research have to be good at financial modeling and may build a 3 statement model  as well as DCF models or others as required.

Financial modeling takes practice, and we recommend browsing our specialized offering of professional financial modeling courses to become an expert.

6. Recommendations

In the recommendations section, the equity research analyst will have a target price (or price target) which tells investors where they expect the stock to be (typically) a year’s time.  In addition to this, they will often make an actual recommendation to investors about what they should do.  The language varies from bank to bank, but examples include:

• Buy / Overweight / Long
• Hold / Market weight / Neutral
• Sell / Underweight / Short

How to Get Into Equity Research

If you’re looking for a career in equity research, then you’ve come to the right place. You’ll have to be good at financial modeling, valuation, and data visualization (charts and graphs for reports), and we’ve got all the courses you need to excel in all these areas.

Our top recommendations for equity research training include the following resources:

• Financial modeling courses
• Valuation course
• Excel training
• Guide to being a good analyst
• See all career resources
• See all capital markets resources
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How to Write an Equity Research Report

By Brian Dzingai |

August 27, 2024

What is an Equity Research Report?

An equity research report will typically focus on a specific stock or industry sector within a specific geographic region or country, and generally make buy or sell recommendations. These reports are produced by a variety of sources, ranging from market research firms to in-house research departments at large financial institutions or boutique investment banks.

Key Learning Points

• An equity research report is a document prepared by an analyst that provides a recommendation to buy, hold, or sell shares of a public company
• An equity research report is a document prepared by an analyst who is part of an investment research team in a brokerage firm or investment bank
• Its purpose is to provide forecasts for future performance to assist in making investment decisions
• It provides an overview of the business, industry it operates in, management team, financial performance, risks and includes a target price and investment recommendation
• It is intended to help an investor decide whether to invest in a stock

Equity Research Report Structure

An equity research report can include varying levels of detail, and although there is no industry standard when it comes to formatting, there are common elements to all equity research reports. This guide includes some fundamental features and information that should be considered essential to any research report, as well as some tips for making your analysis and report as effective as possible.

Access the download to see a real-world example of an Equity Research Report, annotated to show each element discussed below.

Front Page Information

The research report should display basic information about the stock or company, including the company’s ticker symbol, the primary exchange where shares are traded, the primary sector and industry in which it operates, the current stock price and market capitalization, the target stock price, and the investment recommendation.

In addition, a security’s liquidity and float are important considerations for the equity analyst. The liquidity of a stock refers to the degree to which it can be purchased and sold without affecting the price. The analyst should understand that periods of financial stress can affect liquidity. A stock’s float refers to the number of shares that are publicly owned and available for trading and generally excludes restricted shares and insider holdings. The float of a stock can be significantly smaller than its market capitalization and thus is an important consideration for large institutional investors, especially when it comes to investing in companies with smaller market capitalizations. Consequently, a relatively small float deserves mention. Finally, it is good practice to identify the major shareholders of a firm.

In addition research reports will always show the contact details for the analysts and team responsible for publishing the report and making the recommendation.

Investment Summary

Research reports will always begin with a summary of why the report has been published, what action is recommended and the key catalysts for this. This can be the most critical element for the analysts as it must convey as much of the key information as possible and invite the clients to read on to find out more!

The first paragraph will almost always contain the recommendation (and whether it is new or unchanged) and the new target price (versus the old one) plus the main reasons for writing the note. This could be an initiation (an equity research team picking up coverage of the company), company results or broader country or market-related news flow.

The rest of the Summary page will reinforce the investment recommendations and provide opinions on further catalysts for the investment advice.

Once an initiation report has been published, equity research reports on the company tend to be a lot shorter and only contain information relevant to the current issues or news flow.

If it is an Initiation report it will likely include the following information segments to fully brief the reader on the company and its operations:

Business Description 

This section should include a detailed description of the company and its products and services. It should convey a clear understanding of the company’s economics, including a discussion of the key drivers of revenues and expenses. Much of this information can be sourced from the company and from its regulatory filings as well as from industry publications.

Industry Overview and Competitive Positioning

This section should include an overview of the industry dynamics, including a competitive analysis of the industry. Most firms’ annual reports include some discussion of the competitive environment. A group of peer companies should be developed for competitive analysis. The “Porter’s Five Forces” framework for industry analysis is an effective tool for examining the health and competitive intensity of an industry. Production capacity levels, pricing, distribution, and stability of market share are also important considerations.

It is important to note that there are different paths to success. Strength of brand, cost leadership, and access to protected technology or resources are just some of the ways in which companies set themselves apart from the competition. Famed investor Warren Buffett describes a firm’s competitive advantage as an economic “moat.” He says, “In business, I look for economic castles protected by unbreachable moats.”

This section should include a brief description of the company, significant recent developments, an earnings forecast, valuation summary, and the recommended investment action. If the purchase or sale of a security is being advised, there should be a clear and concise explanation as to why the security is deemed to be mispriced. That is, what is the market currently not properly discounting in the stock’s price, and what will prompt the market to re-price the security?

It should also identify the key growth areas of the company and show analysis of regional or divisional sales and profits.

This section should include a thorough valuation of the company using conventional valuation metrics and formulas. Equity valuation models can derive either absolute or relative values. Absolute valuation models derive an asset’s intrinsic value and generally take the form of discounted cash flow models. Relative equity valuation models estimate a stock’s value relative to another stock and can be based on a number of different metrics, including price/sales, price/earnings, price/cash flow, and price/book value. Because model outputs can vary, more than one valuation model should be used.

Valuation will also look at the debt and equity ratio in the company, along with its ability to generate cash flow and profits for the shareholders.

Financial Analysis and Forecasts

This section should include a detailed analysis of the company’s historical financial performance and a forecast of future performance. Financial results are commonly manipulated to portray firms in the most favorable light. It is the responsibility of the analyst to understand the underlying financial reality. Accordingly, a careful reading of the footnotes of a company’s financial disclosures is an essential part of any examination of earnings quality. Non-recurring events, the use of off-balance-sheet financing, income and reserve recognition, and depreciation policies are all examples of items that can distort a firm’s financial results.

Financial modeling of future performance helps to measure the effects of changes in certain inputs on the various financial statements. Analysts should be especially careful, however, about extrapolating past trends into the future. This is particularly important in the case of cyclical firms. Projecting forward from the top or bottom of a business cycle is a common mistake.

Finally, it can be informative to use industry-specific financial ratios as part of the financial analysis. Examples include proven reserves/shares for oil companies, revenue/subscribers for cable or wireless companies, and revenue/available rooms for the hotel industry.

Investment Risks

Along with the investment advice, research reports should also address potential negative industry and company developments that could pose a risk to the investment thesis. Risks can be operational or financial or related to regulatory issues or legal proceedings.

Although companies are generally obligated to discuss risks in their regulatory disclosures, risks are often subjective and difficult to quantify (e.g., the threat of a competing technology). It is the job of the analyst to make these determinations. Of course, disclosures of “qualified opinions” from auditors and “material weakness in internal control over financial reporting” should be automatic red flags for analysts.

Environmental, Social & Governance (ESG)

In addition, the financial institution’s clients will increasingly expect to see information on how the company manages the relationships related to Environmental, Social and Governance. Below are some examples within these three areas that can have a lasting impact on the company’s short- and long-term prospects:

• E nvironmental – how is the company working towards the conservation of the natural world? This can include climate change and carbon emissions, air and water pollution, energy efficiency, waste management, and more.
• S ocial – how does the company consider people and relationships? This can include community relations, human rights, gender and diversity, labor standards, customer satisfaction, and employee engagement.
• G overnance – what are the standards for running the company? This can include board composition, audit committee structure, executive compensation, succession planning, leadership experience, and bribery and corruption policies.

Enroll in our  online ESG course  and learn to identify the principles of ESG and how they are applied to investment strategies.

If you are interested in a career as an equity research analysts or in fixed income research, our research analyst course  covers all the key skills needed as either a sell side analyst in an investment bank or a buy side analyst working in an investment management firm.

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Example of an equity research report.

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Equity Research

Published on :

21 Aug, 2024

Blog Author :

Wallstreetmojo Team

Edited by :

Ashish Kumar Srivastav

Reviewed by :

Dheeraj Vaidya

What Is Equity Research?

Equity Research refers to the process of analyzing a company’s market position to assess the investment opportunities available there and help investors get a clear picture of the business and organization before they finally invest in it. It primarily involves analyzing the company’s financials, performing ratio analysis, forecasting, and exploring scenarios to help make a BUY/SELL stock investment recommendation.

After the analysis and research is thoroughly conducted, equity research analysts put forth their observations in the form of equity research reports .  Once investors consider a company to invest in, the equity research people look into the economic aspects like GDP, growth rates, the market size of the industry and the competition aspects, etc. to assess how worthy they are for an investment.

Table of contents

Equity research explained, equity research video explanation, how to get into equity research, compensation, exit opportunities.

• Top Equity Research Firms

Equity Research vs Investment Banking

Recommended articles.

Equity Research involves preparing an estimate of the company's fair valuation to recommend the buy-side clients. The equity research job rewards analysts with relatively higher compensation, but it also provides excellent exit opportunities. Though, as a research analyst, one may spend 12-16 hours a day at the office; however, this is a dream job for many who love finance and financial analysis .

Equity research is the division of investment banking firms. This section of the firm, as the name suggests, take care of the updates on the firms their clients desire to invest in. The analysts here follow a series of steps to analyze the businesses in the most efficient way to ensure the information forwarded to the investors are accurate and reliable.

The research division explores every aspect of a business and study the companies’ financial track records. From historical patterns to current involvements, the professional take into consideration everything to make sure they do not mislead clients in any manner. From the GDP to the market size to the regular cash flows, etc., the professional observes everything possible.

Equity research is all about finding the valuation of a listed company (Listed companies trade on a stock exchange like NYSE or NASDAQ etc. Once the professionals understand the economics behind the business, they perform the financial statement analysis of the historical balance sheet , cash flows, and income statement to form an opinion on how the company did in the past.

Once they accomplish their part of research, they mention all their observations in an equity research report.

Equity Research plays a critical role in filling the information gap between the buyers and sellers of shares. All levels (individual or institutional) may not have the resources or capabilities to analyze every stock. Additionally, full information is not provided by the management, due to which further in-efficiencies are created and stocks trade below or above the fair value.

Equity Research analyst spends a lot of time, energy, and expertise analyzing stocks, following the news, talking to the management, and estimating stock valuations . Also, equity research tries to  identify the value stocks out of the massive ocean of stocks and help the buyers to generate profits.

An independent equity research firms  do not have a trading and sales division . They perform financial analysis with the idea of charging fees on a per report basis. On the contrary, for major equity research firms, fee income is earned by brokerage trades (Soft Dollars).

Equity research jobs come in various forms. To understand the responsibilities that one gets exposed to when they join this division of investment banks, it is important to study the roles offered in the field. Let us have a quick look at them below:

Head of Research

The Head of Research acts as a key member to manage the Equity research analyst team, providing the team with leadership, coaching, and guidance to ensure that the brokerage goals and objectives are met. They perform the following functions:

• They oversee research reports, publications; it's editing and monitoring the process of analysis and brokerage recommendations.
• They ensure that adequate support is provided to sales and trading teams.
• The heads contribute to equities by providing expert-level inputs for overall strategy, goals, initiatives, and budgets.
• They are responsible for Analyst hiring, compensation, development, and performance management.
• They act as a link between fund managers and the research teams.

Senior Analyst

Below is an excerpt from a job requirement for a Senior analyst -

source -  FederatedInvestor

• Typically an equity research senior analyst would cover a sector with not more than 8-15 stocks. Coverage implies tracking these stocks actively. Senior Analyst tries to bring maximum companies under coverage in the sector they track (initiating the coverage)
• Many senior equity analysts cover companies that investors may want to invest in. These companies are like the high market capitalization companies or those with higher trading volume. There could also be cases where investors want to invest in small-cap or mid-cap stock companies with fewer analysts' coverage.
• One of the most important responsibilities of a Senior Analyst is to develop a Quarterly Results Update – results from summary, expectation, and performance against those expectations, updating forecasts, etc.
• They talked to the clients ( buy side ) and showcased their calls on the stocks. They have to communicate buy-sell recommendations of stocks diligently. Additionally, they have to articulate clearly why a certain stock should be included in their portfolio.
• Write important industry event updates like conferences or management meeting updates.
• To update the Sales team, deal with the trading team about the latest news in the sector and the company, and keep them updated with the brokerage's view.
• Attending conference calls for important company updates, results, etc
• Attend trade shows, meet company management, suppliers meetings, etc.

Below is the summary of the Associate job description from  efinancialcareers

• The primary job is to support the Senior Analyst in the best way possible.
• An associate has prior experience of around three years or so in a similar industry.
• Updating the financial model, verifying the data, and preparing the valuation models.
• Working on various client requests like a request for data, industry analysis , etc.
• Prepare draft Equity Research Reports (update of results, events, etc.)
• Work on client requests
• Participate in meetings and calls with clients on the stock under coverage.

Junior Analyst

Here is a snapshot of the Junior Equity Analyst's responsibilities.

source - careers.societegenerale.com

• The main responsibilities of a Junior Analyst are to support the Associate in every format.
• The majority of the work done by Junior Analysts is related to data excel etc.
• Also, Junior Analysts may be involved in doing primary research, industry research, coordinating with clients, etc.
• We maintain the industry database, charts, graphs, financial models, etc.

Now when the roles and responsibilities of each of the professional employed in the equity research division of the investment banking firm is known, it is important to note the hierarchy. This helps understand who is monitored by whom and how it all works step by step:

• A typical hierarchy at an Equity Research firm starts with the Head of Equities/Head of Equities at the top.
• After that, there are Analysts (seniors) covering different sectors. Each analyst mostly covers around 10-15 companies in a specific sector.
• Each Senior analyst may be supported by an Associate, who a couple of Junior Analysts may support.

Equity Research analysts follow stocks and recommend whether to buy, sell, or hold those securities using fundamental analysis . Equity Research is a very challenging job, where an analyst may be required to spend more than 12-14 hours a day.

For creating a professional Equity Research Financial model, an expert analyst's recommended approach must follow the below-mentioned steps:

Industry Analysis

The first thing to take care of while doing a professional analysis is learning about the economic parameters affecting the industry. These may include factors, like the industry dynamics, competitors, etc. From how a firm deals with its competitors and strategize policies to improve and be the first choice of end users to how it adapts to the latest trends and advancements, everything falls under this step of equity research.

Fundamental Analysis

Fundamental analysis includes studying the role of management in the form as well as studying the financial statements of the business. The equity firm professionals have the liberty to ask questions from the management directly, which the investors cannot. Hence, having a dedicated equity research team is highly recommended to individual and institutional investors.

When it comes to studying the financial statement, be it a balance sheet or cash flow statement, the analysts try to have a separate sheet to reflect the performance as depicted by those statements. The most important steps here is to perform a ratio analysis of the company under consideration. Let us check the following example depicting how ratio analysis was carried out for Colgate’s historical years:

Forecasting

In the report, the analysts also provide a forecast, thereby guiding investors of the pros and cons of investing in the company they have been considering for so long. This conclusion is derived on the basis of how they decipher the information gathered. The professionals consider the industry size and growth, market share of the company and its revenue generated to derive their conclusions.

• Company management does not provide the future financial projections of the company. Therefore, a research analyst needs to project this data. Forecasting the financials of the company is known as Financial Modeling. I earlier wrote a 6000-word step-by-step tutorial on Financial Modeling. If you want to master Financial Modeling, you can refer to this Financial Modeling Tutorial.

Valuation is the next step in the process. In the process, the analysts evaluate the company’s net worth. This is done in two ways – by considering the Discounted Cash Flow (DCF) or by figuring out the relative valuations. Once the financial model is ready, analysts calculate DCF, which is the valuation method determining the value of the investment that one is supposed to make with respect to the future cash flows as expected.

Relative valuation, on the other hand, is based on comparing the company’s valuation under consideration with the valuation of other firms.

The common approach the analysts follow to figure out the relative valuations is given below.

• The professionals identify the comparable based on the business, market capitalization , and other filters.
• They, then identify a suitable trading valuation multiple to be used for this business.
• The analysts use the average valuation multiple to find the valuation of the company.
• In the last step, they suggest Undervalued or Over-valued.

Research Report

Once you have prepared the financial modeling and found the fair valuation of the company, the analysts communicate this to clients through the research reports. This research report is very professional and is prepared with a lot of caution. Plus, it contains recommendations, guiding investors or clients of what return they could expect the investment to generate in a specific time period.

Let us consider the following examples to understand the equity research definition and how does it work:

Suppose Jenny asks John to invest in her company X, which has been operating in the market for over 10 years. Though it has not been a dominant market player, the growth or performance of the company has been consistent. For the sake of friendship, John could agree to make the investment, but he decides to assess the maximum risk associated with the deal.

For risk assessment, he contacts an investment banking firm to conduct thorough research and let him know the possibilities. The firm assigns the task to a dedicated equity research team, which ensures John of the same consistent growth, indicating investment in X would not be too risky as the company has been showing a positive growth throughout its journey.

Hence, John agrees to invest in Jenny’s company.

On November 07, 2023, Marathon Capital LLC announced establishing its equity research division with an aim to study and observe the constantly transitioning global energy for establishing a clean economy, which it has always wanted to set up. The team has selected members for the venture, who are expected to leverage this product. This team would utilize its prior skill along with their experience in the clean energy sector to conduct research and make the firm, one of the most dominant players in the finance industry.

When it comes to entering the field of equity research, there are few criteria that an individual must fulfill. Whether one is willing to join this division of investment banking firms as an analyst or as an associate, there are requirements to meet.

For holding a position in the equity research field, one must possess the following skill sets qualifications:

Key highlights to note from this excerpt is -

• MBA is a plus (not a necessity). If you are an MBA, you have certain advantages, but if you are a graduate, you should not get disheartened. You have a chance if you prove your interest in finance. Please look at Can an engineer get into an Investment Bank?
• Financial discipline is not essential, but you must have a strong interest in the financial markets with excellent quantitative and analytical skills.
• You should be fluent in English and have excellent verbal and written communication skills.
• You possess intellectual curiosity, focus, and creativity and have a keen research instinct with creative problem-solving abilities.
• Strong proficiency in Microsoft Excel and Powerpoint
• CFA designation - This is one important designation that the finance industry respects. Try to ensure that you take the CFA examination and pass at least a couple of levels.
• Other top skill sets required to enter the Equity Research Industry are –
• Excel Skills
• Financial Modeling
• Report Writing

One of the major concerns of individuals willing to join this field is the salary figure they are offered. Here are designation-wise estimates of compensation one is supposed to receive:

• Junior Analyst/Assistants have a base comp of $45,000 - $50,000 per year (average)
• Associates have a base salary of $65,000 - $90,000 per year (average) depending on the experience. Additionally, they get a bonus of 50-100% of the base salary (in an average to good year)
• Senior Analysts generally have a base compensation of $125,000 - $250,000. Their bonus may range from 2-5 times the base compensation.

The opportunities are huge for sell-side research analysts. Career opportunities that individuals are exposed to once they confirm meeting the eligibility criteria have been explained in detail below:

Within Equity Research Firm

• If you join as an associate, you can move up the ladder to become a Senior analyst assuming full responsibility for the sector coverage.
• Later you can move further up to become Head of Research and Head of Equities.

Private Equity Analyst

• Sell side analysts also move to the Private Equity domain working as Private Equity Analyst .
• Instead of analyzing public companies, they analyze private companies from the point of view of investments.
• They can move up the hierarchy to become a Private Equity Fund manager. Check out the list of Top Private Equity Firms .

Investment Banking Analysts

• The movement of sell-side analysts to Investment banking is slightly tough but not impossible.
• Sell side analysts are fully aware of financial research and modeling-related work.
• They haven't worked on transaction-related work like IPO filing documents, Pitch book , registration work, etc. If you are confused between Investment Banking and Equity Research, read this article - Investment Banking vs. Equity Research .

Buy Side Firms

• Sell side analysts sometimes are also absorbed as buy side analysts (working for Mutual funds, etc.).
• The buy side analysts assume the responsibility of fund managers over some time.

Corporate Finance

• Sell-side analysts work a lot on financial analysis, analyzing company projects and their effect on the overall company's financials. Hence, they get into typical Corporate finance roles of large corporations (take care of financial analysis, planning Projects, etc.)
• Another unique role they get into is Investor relations. As sell-side analysts, they get equipped with the FAQs and how to deal with critical information and its sharing, etc. Due to this, they also become eligible for Investor Relations jobs.

Top Equity Research Firms

Institutional Investors ranking suggests that in 2014, the best research firm was Merril Lynch Bank of America , second place was taken by  JPMorgan , and  Morgan Stanley  came third.

Apart from the top 3 above, there are other notable equity research firms (listed below)

Equity research, being a part of investment banking firms, are supposed to have similar functions as investment banking division of the firms. However, the two terms differ widely, thereby making it important for individuals and entities to be aware of them. Listed below are the differences between the two to have a quick look at if one is willing to take assistance or start a career in the fields:

• While investment banking has a series of positions in line for individuals to join, get promoted, and grow professionally, equity research offers only two but yet important designations to show their performance – one if of an associate and the other is of an analyst.
• The hierarchy to be followed for investment banking is huge and rigid. This means, to get to the next position, one must learn and fulfill the expectations at the current position/designation.
• When the hierarchical structure is organized and there is something to learn at every stage, performance betters and there are chances of having excellent professionals to carry out respective tasks. This is what the field of investment banking ensures. On the other hand, the equity research field has limited opportunities and hence individuals try to grab as much knowledge as possible in the positions they work in. Plus, they are expected to be and they are excellently skilled.

This article has been a guide to what is Equity Research. Here, we explain vs investment banking, how to do it, how to get into it, roles, examples, and hierarchy. You may also have a look at the following related articles for a better understanding:

• Equity Research Interview Questions

A Guide on How to Write an Equity Research Report

If you're interested in the financial industry or you're studying finance, you've probably heard of equity research reports. These documents are crucial for investment banking and trading firms that need to analyze and evaluate different strategics in the market. But what exactly are equity research reports, and how can you write one yourself? In this article, we'll guide you through the process of creating an equity research report, step-by-step.

Understanding the purpose of an equity research report.

The first step to writing a great equity research report is understanding its purpose. At its core, an equity research report is a document that provides in-depth analysis and valuation of a company's stock. The report is written for investors who want to understand whether the company is a good investment opportunity.

Equity research analysts spend countless hours researching and analyzing a company's financial statements, industry trends, and economic conditions before they write their report. They use a variety of analytical tools and techniques to evaluate a company's performance, including financial ratios, discounted cash flow analysis, and market multiples.

One of the key goals of an equity research report is to provide investors with an objective and unbiased assessment of a company's future prospects. Analysts are expected to be independent and free of conflicts of interest, so that investors can trust the information they provide.

What is an Equity Research Report?

An equity research report is a comprehensive document that contains detailed information on a particular company, industry, or asset. The report is prepared by an equity analyst, who works for an investment banking or trading firm.

Equity research reports typically include a variety of sections, including an executive summary, company overview, industry analysis, financial analysis, valuation , and investment recommendation. The executive summary provides a brief overview of the report's findings, while the company overview provides a detailed description of the company's business model, products, and services.

The industry analysis section provides an overview of the company's industry, including market size, growth prospects, and competitive landscape. The financial analysis section provides an in-depth analysis of the company's financial statements, including income statements, balance sheets, and cash flow statements.

The valuation section provides an estimate of the company's intrinsic value, based on a variety of factors, including earnings, cash flow, and assets. The investment recommendation section provides the analyst's opinion on whether the stock is a buy, hold, or sell, based on their analysis of the company's financial health and future prospects.

Importance of Equity Research Reports in the Financial Industry

Equity research reports are important in the financial industry because they help investors make informed decisions about which stocks to buy, hold or sell. These documents provide valuable information on a company's financial health, strategy, and overall performance.

Equity research reports are also important for companies, as they can help them attract new investors and improve their stock price. A positive equity research report can increase investor confidence in a company, leading to increased demand for its stock and a higher stock price.

However, equity research reports can also be controversial, as analysts may have conflicts of interest that can bias their recommendations. For example, an analyst may work for an investment bank that has a financial interest in the company being analyzed, which could lead to a biased report.

Overall, equity research reports play an important role in the financial industry, providing investors with valuable information that can help them make informed investment decisions.

Preparing to Write an Equity Research Report

Equity research reports are crucial in the world of finance as they help investors make informed decisions. These reports are written by equity research analysts, who analyze a company's financial performance and provide recommendations to investors. Before you start writing your equity research report, you need to gather relevant information and perform extensive research on the company you're analyzing. The following steps will help you prepare for your report:

Gathering Relevant Company Information

Before you start analyzing a company, you need to know everything about it. You must start by gathering information on the company you're analyzing. This includes the company's official name, primary business, history, management team, and more. You can find this information on the company's official website, annual reports, regulatory filings, and other relevant sources. It is important to ensure that the information you gather is accurate and up-to-date.

For instance, if you're analyzing a tech company, you need to know what products or services they offer. You also need to know how long they've been in business, who their key executives are, and what their mission statement is. This information will help you gain a better understanding of the company and its operations.

Analyzing Financial Statements

Once you have gathered information about the company, you need to analyze its financial statements. Financial statements are the company's official records that show its financial performance. These documents include the balance sheet, income statement, and cash flow statement. You can use financial ratios and financial modeling techniques to analyze the company's financial health.

For instance, you can use the price-to-earnings ratio (P/E ratio) to determine whether a company's stock is undervalued or overvalued. You can also use the debt-to-equity ratio to determine whether a company is financially stable or not. By analyzing a company's financial statements, you can gain insights into its profitability, liquidity, and solvency.

Conducting Industry and Competitor Analysis

Finally, you need to conduct industry and competitor analysis. This involves researching the industry in which the company operates, as well as analyzing its competitors. Understanding the competitive landscape can help you evaluate the company's strengths and weaknesses and identify future growth opportunities.

For instance, if you're analyzing a company in the retail industry, you need to know who its competitors are and what they're doing. This will help you identify the company's competitive advantage and determine whether it can sustain its growth in the long run. Industry analysis can also help you identify trends and changes in the market that may affect the company's performance.

Writing the Executive Summary

The executive summary is a crucial part of the equity research report. It provides a concise overview of the report's key findings and investment recommendations. In essence, it serves as a snapshot of the entire report, allowing investors to quickly grasp the main points and decide whether to read the full report.

However, writing a great executive summary can be a challenge. It requires the writer to condense a large amount of information into a few paragraphs while still conveying the most important details. Here are some tips for writing a great executive summary:

Key Components of an Executive Summary

A great executive summary should include the following components:

• Company Overview: This section should include a brief summary of the company you're analyzing. It should cover the company's history, its products or services, and its mission statement. This section should also include any recent news or developments that are relevant to the company's performance.
• Industry Analysis: This section provides an overview of the industry in which the company operates. It should cover the size of the industry, its growth prospects, and any major trends or challenges facing the industry. This section should also include an analysis of the company's position within the industry.
• Financial Analysis : This section provides an overview of the company's financial performance. It should cover the company's revenue, profitability, and cash flow. This section should also include an analysis of the company's financial ratios, such as its price-to-earnings ratio and its debt-to-equity ratio.
• Investment Recommendations: This section should include your buy, hold, or sell recommendations, along with the target price and time horizon. It should be based on your analysis of the company's financial performance, its position within the industry, and any other relevant factors.

Tips for Writing a Concise and Informative Executive Summary

When writing your executive summary, you should keep the following tips in mind:

• Keep it short and concise: Aim for a summary that is one or two paragraphs long. Remember that the purpose of the executive summary is to provide a quick overview of the report, so it should be brief and to the point.
• Focus on the most important information: Highlight the key findings and recommendations that are most relevant to investors. Avoid getting bogged down in details that are not essential to the investment decision.
• Use clear and concise language: Avoid using jargon or technical terms that investors may not understand. Use simple, straightforward language that is easy to understand.
• Include a call to action: End your executive summary with a clear call to action, such as "Buy," "Hold," or "Sell." This will help investors quickly understand your investment recommendation.

By following these tips, you can write an executive summary that effectively communicates your investment analysis and recommendations to investors. Remember that the executive summary is often the first thing investors will read, so it's important to make a strong first impression.

Assessing the Company's Business Model and Strategy

After writing your executive summary, the next step is to assess the company's business model and strategy. This is an important step in determining the company's strengths and weaknesses, and identifying areas for improvement.

When assessing the company's business model and strategy, it's important to consider a variety of factors. These may include the company's competitive advantage, growth strategy, and financial performance.

Evaluating the Company's Competitive Advantage

One key factor to consider when evaluating the company's competitive advantage is product differentiation. Does the company offer unique products or services that distinguish it from its competitors? This can be a major advantage, as it can help the company attract and retain customers.

Another important factor to consider is cost advantage. Does the company have lower production costs than its competitors? This can help the company maintain a competitive edge by offering lower prices or higher profit margins.

Brand recognition is also an important factor to consider. Is the company's brand well-known and respected? A strong brand can help the company build customer loyalty and increase its market share.

Analyzing the Company's Growth Strategy

Another key factor to consider when assessing the company's business model and strategy is its growth strategy. This includes the company's plans for expansion, research and development, and mergers and acquisitions.

Expansion can be a key driver of growth for a company, but it can also be risky. It's important to evaluate the company's expansion plans carefully to ensure that they are well thought out and have a high likelihood of success.

Research and development is another important factor to consider. Is the company investing in new products or technologies that could give it a competitive advantage in the future? If so, this could be a good sign for the company's long-term growth potential.

Mergers and acquisitions can also be a key part of a company's growth strategy. However, it's important to evaluate these deals carefully to ensure that they make strategic sense and will create value for the company's shareholders.

Performing Financial Analysis

Once you have gathered all the necessary financial data, the next step is to perform financial analysis to evaluate the company's financial health. This is a crucial step in the investment process, as it helps investors make informed decisions about whether or not to invest in a particular company.

Financial analysis involves using a variety of tools and techniques to analyze the company's financial statements, including financial ratios, cash flow analysis, and valuation methods.

Ratio Analysis

Ratio analysis is a popular method of financial analysis that involves comparing different financial ratios to evaluate the company's financial health. Financial ratios are useful because they allow investors to compare a company's performance over time, or against its competitors or industry benchmarks.

Some of the most common financial ratios used in ratio analysis include the debt-to-equity ratio, return on equity, and profit margin. These ratios can provide valuable insights into a company's financial health, including its ability to generate profits, manage debt, and create shareholder value.

Cash Flow Analysis

Cash flow analysis is another important tool for evaluating a company's financial health. This involves analyzing the company's cash flow statement to understand its ability to generate cash and fund operations.

When performing cash flow analysis, it's important to look at the company's operating cash flow, investing cash flow, and financing cash flow. By understanding how the company generates and uses cash, investors can gain a better understanding of its financial health and future prospects.

Valuation Methods

Valuation methods are used to determine a company's fair value. There are several different valuation methods that investors can use, including discounted cash flow analysis, multiples analysis, and precedent transactions analysis.

Discounted cash flow analysis involves estimating the future cash flows of a company and discounting them back to their present value. Multiples analysis involves comparing a company's financial ratios to those of its peers or industry benchmarks. Precedent transactions analysis involves looking at the prices paid for similar companies in the past to estimate the fair value of the company being analyzed.

By using a combination of financial analysis tools and techniques, investors can gain a comprehensive understanding of a company's financial health and make informed investment decisions.

Providing Investment Recommendations

After performing financial analysis and evaluating the company's business model and strategy, the next step is to provide investment recommendations. This is a critical step in the investment process, as it can have a significant impact on the performance of your investment portfolio.

When providing investment recommendations, it's important to consider a variety of factors and to provide a clear and concise recommendation that reflects your analysis and evaluation of the company's financial health, competitive advantages, growth potential, and valuation.

Buy, Hold, or Sell Recommendations

Your investment recommendations should be based on a thorough analysis of the company's financial health, competitive advantages, growth potential, and valuation. Based on this analysis, you should provide a clear and concise recommendation to buy, hold, or sell the company's stock.

If you recommend buying the stock, you should provide a detailed explanation of why you believe the stock is undervalued and has strong growth potential. If you recommend holding the stock, you should explain why you believe the stock is fairly valued and has limited upside potential. If you recommend selling the stock, you should explain why you believe the stock is overvalued and has limited growth potential.

Risk Factors and Considerations

When providing investment recommendations, it's important to consider and highlight the risks associated with investing in the company. These risks can include regulatory risks, competitive risks, and operational risks.

For example, if the company operates in a highly regulated industry, you should consider the potential impact of changes in regulations on the company's financial performance. Similarly, if the company operates in a highly competitive industry, you should consider the potential impact of increased competition on the company's market share and profitability.

Target Price and Time Horizon

Finally, when providing investment recommendations, you should provide a target price and time horizon. The target price represents the price at which you believe the stock is undervalued, while the time horizon represents the period over which the target price is expected to be achieved.

When determining the target price and time horizon, it's important to consider a variety of factors, including the company's financial performance, industry trends, and macroeconomic conditions. Additionally, it's important to periodically review and update your target price and time horizon as new information becomes available.

Overall, providing investment recommendations requires a thorough analysis of the company's financial health, competitive advantages, growth potential, and valuation. By considering a variety of factors and providing a clear and concise recommendation, you can help investors make informed investment decisions and achieve their investment goals.

Formatting and Presenting the Equity Research Report

The final step is to format and present your equity research report. Here are some tips for formatting your report:

Structuring the Report for Clarity and Flow

Your report should be structured in a logical and easy-to-follow way. You should use headings and subheadings to break up the content into different sections. Each section should be clearly labeled, with a brief summary of its contents.

It's important to keep in mind that your report will likely be read by busy investors who are looking for information quickly. By structuring your report in a clear and organized way, you can make it easier for them to find the information they need.

One effective way to structure your report is to begin with an executive summary that provides a high-level overview of the company's financial performance and prospects. This can be followed by sections that provide more detail on the company's financial statements, industry trends, and competitive landscape.

Visual Aids and Supporting Data

You can use charts, graphs, and tables to present data in a visual and clear way. These visual aids can help investors understand complex financial information more easily.

When using visual aids, it's important to keep them simple and easy to read. Use clear labels and avoid cluttering the chart or graph with too much information. You should also ensure that the visual aids support the points you are making in your report.

In addition to visual aids, you should also include supporting data in your report. This can include financial ratios, industry benchmarks, and other relevant data points. By including this data, you can provide additional context for your analysis and help investors make informed decisions.

Proofreading and Editing the Report

Finally, you should proofread and edit your report for clarity, grammar, and style. It's a good idea to have a colleague or mentor review your report before submitting it to ensure that it is error-free and presents a cohesive picture of the company's financial health.

When proofreading your report, pay close attention to the language you are using. Avoid technical jargon and use clear, concise language that is accessible to a wide range of readers. You should also ensure that your report is well-organized and easy to read, with a consistent style throughout.

By taking the time to format and present your equity research report effectively, you can increase its impact and make it more likely to be read and acted upon by investors.

Conclusion and Key Takeaways

In summary, writing an equity research report involves gathering relevant information, performing financial analysis, evaluating a company's business model and strategy, and providing investment recommendations. By following these steps and formatting your report in a clear and concise way, you can create a valuable resource for investors in the financial industry.

Finally, it's important to note that equity research is a constantly evolving field. To be successful, you must have a strong foundation and continuously improve your skills and knowledge through ongoing education and professional development.

Recap of the Equity Research Report Process

The equity research report process involves:

• Gathering relevant information about the company.
• Analyzing the company's financial health.
• Evaluating the company's business model and strategy.
• Providing investment recommendations.
• Formatting and presenting the equity research report.

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The Comprehensive Guide to Equity Research

When it comes to making money in the stock market, there is no one silver bullet. If you want to be successful, you need to use a variety of strategies and tools at your disposal. One of the most important tools that any investor can use is equity research. Equity research can give you an edge over the competition by helping you make informed investment decisions. In this guide, we will discuss what equity research is, how it works, and why it is so important for investors. We will also provide tips on how to find high-quality equity research reports. So whether you are a seasoned investor or just starting out, this guide has something for you!

On the other hand, if you are looking to boost your ROI on a private equity exit, then you might want to read How ESG Will Sweeten Your Private Equity Exit!

What is equity research and what does it entail?

What is the role of equity research analysts, how does an equity research report help investors make informed decisions, tips for finding high-quality equity research reports, the benefits of using equity research in your investment strategy.

Equity research is the process of analyzing a company’s financial statement in order to make better-informed investment decisions. It involves looking at a variety of factors, including the company’s financial health, its competitive position, and the overall market conditions.

Equity research can be used to make both buy and sell decisions. When equity research is performed for a buy decision, the goal is to find companies that are undervalued by the market and have the potential to generate above-average returns.

For sell decisions, the goal is to identify companies that are overvalued and likely to underperform in the future. Equity research is an important tool for investment professionals, but it can also be useful for individual investors who are looking to make informed decisions about where to invest their money.

Equity research analysts play an important role in the financial world. They provide analysis and recommendations to clients, including institutional investors such as banks and hedge funds, about which stocks to buy and sell.

Equity analysts begin their research by reviewing a company’s financial statements and other publicly available information. This includes reading company financial filings, attending earnings calls, and speaking with industry experts. They then use this information to build models that predict the company’s future revenue, earnings, and cash flow.

In addition, equity analysts also conduct interviews with the company’s management team, customers, and suppliers in order to get a better understanding of the business.

Based on this research, analysts produce reports that offer their thoughts on a company’s prospects and provide guidance on whether to buy, hold, or sell its stock. While equity research analysts work for banks, asset managers, and other financial institutions, they are also available to the general public through equity research reports that are published online.

While equity research can be time-consuming and complex, it is an essential part of the investment process. By conducting thorough research on companies, an equity research analyst helps investors make more informed decisions about where to allocate their capital.

Equity research reports provide a detailed analysis of a company’s financials, business model, and competitive landscape. They also offer insights into the market trends that may impact the company’s performance. As a result, equity research reports can help investors identify companies that are well-positioned to succeed in the current market environment. While no research report can guarantee success, it can provide investors with the information they need to make better-informed investment decisions.

When you’re looking for equity research reports, it’s important to find ones that are accurate and unbiased. After all, these reports can play a major role in your investment decisions. Here are a few tips to help you find quality equity research reports:

1. Look for well-established firms

Equity research is a competitive business, and the best equity research firms tend to be well-established and have a reputation to uphold. These firms are usually more careful about the quality of their research and have more resources to devote to producing high-quality reports.

In addition, these firms tend to be more independent and objective in their research since they are not as reliant on investment banking business as the companies they cover. As a result, if you are looking for high-quality equity research, it is generally best to focus on well-established firms. If you prefer the white glove approach, you can always find of one the many independent equity research boutiques.

2. Pay attention to equity analyst credentials

One way to evaluate the quality of an equity research report is to look at the credentials of the equity analyst. Check for experience in the industry and a good track record of accurately predicting stock performance. These are signs that the equity research analyst knows what they’re talking about and can be trusted to give reliable insights.

When you’re making investment decisions, you want to base them on the best information possible, so it’s worth taking the time to find reports from analysts with strong credentials.

3. Read multiple reports on the same company

Looking at multiple reports on the same company is a great way to get a complete picture of what is going on. This is because each report will highlight different aspects of the company. One report may focus on the financials, while another may focus on the products and services. By reading multiple reports, you can get a more well-rounded view of the company.

Additionally, you can compare and contrast the different reports to see where they agree and where they differ. This can help you to form your own opinion about the company and make more informed investment decisions.

4. Be wary of investment recommendations

One important tip to keep in mind when looking for high-quality equity research reports is to be wary of investment recommendations. Equity research analysts are not licensed financial advisors, and their primary goal is to provide information, not to give investment advice.

As such, their stock recommendations should be viewed as one possible piece of information to consider but not as a definitive buy or sell signal.

When an equity research analyst does make stock recommendations, it is important to carefully consider the reasoning behind the recommendation and to weigh it against other factors before making any investment decisions.

5. Pay attention to the date of the report

Obviously, you’ll want to make sure that the information is up-to-date. Reports that are more than six months old may not accurately reflect the current state of the company. The company may have had a major event, such as a new product release, or a change in management, that has affected its financial performance.

Additionally, equity research analyst ratings and price targets can change over time, so it’s important to make sure you’re using the most recent data.

6. Read the report thoroughly before making any decisions

Equity research reports can be incredibly helpful when you’re trying to make investment decisions. However, it’s important to read the entire report before making any decisions. Don’t just focus on the parts that confirm your existing beliefs. Instead, read the report thoroughly and consider all of the information before making any decisions.

Equity research reports can provide invaluable insights into potential investments, but you need to be sure that you’re reading the entire equity research report before making any decisions.

7. Be willing to challenge your assumptions

As an investor, it’s important to always be willing to challenge your assumptions. Even the best equity research reports may contain information that contradicts your own analysis. However, if you’re not open to re-evaluating your position, you could miss out on a great opportunity.

By following these tips, you can help ensure that you are getting high-quality equity research reports that will provide valuable insights into your investments.

Equity research is a type of analysis that assesses the value of a company’s stock. Equity researchers typically work for investment banks, mutual funds, or hedge funds. However, there is a growing trend of individual investors using equity research to inform their investment decisions. There are many benefits of using equity research, including:

1. Helps to identify potential investments

An equity research report can help investors identify companies that are undervalued by the market and may be ripe for investment. By analyzing the financial statements of a company, an equity research analyst can provide investors with an assessment of its true worth and potential for growth.

This information can be invaluable in making investment decisions, as it can help to identify opportunities that may have been overlooked by the market. In addition, equity research can provide insights into a company’s competitive strengths and weaknesses, which can play a vital role when deciding to invest.

2. Gives an overview of a company

One of the benefits of using equity research in your investment strategy is that it will provide you with an overview of a company’s business model, financials, competitors, and growth prospects. This information can be very helpful in making investment decisions about whether or not to invest in a company.

3. Analyzes risk

Another benefit of using an equity research report in your investment strategy is that analysts will often assess the risks associated with investing in a particular company. This can help investors be more clear about where to allocate their capital.

Equity research can help you to identify potential risks and learn more about a company before making an investment. This information can be invaluable in helping you to protect your investments and reach your financial goals.

4. Saves time

When you use equity research in your investment strategy, it can save you a lot of time. Equity research includes information gathering, analysis, and recommendations, which can all be time-consuming tasks if you try to do them yourself. By using equity research, you can outsource these tasks to professionals who have the expertise and experience to do them quickly and effectively.

This can free up your time so that you can focus on other aspects of your investment strategy or simply enjoy your life outside of investing. In today’s fast-paced world, saving time is a valuable commodity, and equity research can help you do just that.

5. Can be used in conjunction with other tools

Equity research can be used in conjunction with other tools. This includes technical analysis and fundamental analysis. Technical analysis is a method of evaluating securities by analyzing market data, such as price and volume.

Fundamental analysis is a method of evaluating a security by analyzing its financial statements. By using both methods, investors can get a complete picture of any security and decide what’s best for them.

6. Helps you stay disciplined

When it comes to investing, discipline is key. Without it, you can easily get caught up in the emotions of the market and make decisions that are not based on sound logic. This is where equity research comes in.

By providing you with all of the information you need about a company, equity research can help you stay disciplined and focused on your investment strategy. In addition, by using equity research alongside other tools, such as technical analysis, you can further increase your chances of making successful investments.

7. Gives you an edge over other investors

Utilizing equity research can give you an advantage over other investors who do not. Equity research provides an extensive analysis of a company, its financials, products, and all its prospects. This information is not always readily available or easy to find, so by using it, you can give yourself an edge in your investment strategy.

What is investment banking?

Investment banking is a financial institution that helps companies raise money by issuing and selling securities. Investment banks also help companies by providing advice on mergers, acquisitions, and other strategic decisions.

In addition to working with companies, investment banks also work with governments and other organizations. Investment banking is a complex and risky business, but it can be very profitable for both firms and their employees.

Investment bankers typically have a bachelor’s degree in business or economics. Many investment bankers also have an MBA or a master’s degree in finance. But eventually, it all comes down to the experience and ability to handle financial and nonfinancial reports and make financial models.

What is the role of investment bankers?

Investment bankers are financial professionals who work with clients to raise capital by issuing and selling securities. They typically work for banks, but there is a growing number of independent firms. Investment bankers typically have a four-year degree in business or economics, although some jobs may require a master’s degree. In addition to their educational background, investment bankers must be very good at multitasking, managing large sums of money, and working under pressure.

The role of an investment banker is to act as a middleman between the company that wants to issue securities and the investors who want to buy them. Investment bankers typically work with large corporate clients, but they may also work with smaller companies, governments, and even individuals.

They first assess the needs of their client and then develop a plan to raise the needed capital. This plan will include finding potential investors, negotiating terms, and then issuing and selling the securities. Once the securities have been sold, the investment banker will monitor the market conditions to ensure that the securities maintain their value.

Investment bankers play an important role in our economy by helping companies raise the capital they need to grow and expand. They provide an essential service by connecting companies with potential investors and helping to ensure that investments are made wisely.

What are the types of the investment banking industry?

Investment banking can generally be classified into one of three categories:

1. Bulge bracket banks

Bulge bracket banks are the largest and most prestigious investment banks in the world. They typically have a global reach, and their clients include major corporations, governments, and financial institutions.

Bulge bracket banks is a term that was coined in the 1970s, and it refers to the top tier of investment banks. The name comes from the fact that these banks are much larger than their competitors, and they often have a dominant market share.

Some of the largest bulge bracket banks include Goldman Sachs, JPMorgan Chase, and Morgan Stanley. These banks are often involved in the most complex and high-profile transactions, and they have a team of experienced professionals who can provide a wide range of services.

Bulge bracket banks typically have a strong presence in key financial markets around the world, and they are often able to offer their clients preferential treatment.

2. Middle-market banks

Middle-market banks are a type of investment banking that focuses on providing capital to entities with annual revenue of $50 million to $1 billion. These banks usually have fewer than 500 employees and are headquartered in the United States. They typically provide loans, lines of credit, and other financial services to small and medium-sized businesses.

Middle-market banks are typically divided into two categories: regional banks and national banks. Regional banks are typically smaller and focused on a specific geographic region, while national banks are larger and have a nationwide presence. Some middle-market banks may also have international operations.

3. Boutique banks

The third type of investment banking industry is boutique banks. They are smaller, more nimble institutions that often focus on providing specialized services to a particular type of customer, while some focus on high-net-worth individuals. For example, some boutique banks may focus on small businesses, while others may cater to a specific niche, such as healthcare or technology.

Because they are less beholden to shareholders and other stakeholders, boutique banks can often offer more personalized service than their larger counterparts. As a result, these institutions are quickly becoming a popular choice for those who want a more intimate banking experience.

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Is equity research the same as investment banking?

No, equity research is not the same as investment banking. Equity research is focused on providing analysis and recommendations to institutional investors, while investment banking is focused on providing corporate finance and capital market services to issuers of securities.

While there is some overlap between the two fields, they are distinct disciplines with different clientele, objectives, and activities. Equity research analysts conduct independent research and collaborate with portfolio managers to make investment decisions, while investment bankers work with issuers of securities to underwrite new debt and equity issues and provide other financial advisory services.

Thus, while both equity research and investment banking are important parts of the financial services industry, they are distinct occupations that serve different purposes.

Final thoughts

Equity research is a process of evaluating a company and its securities with the aim of determining its investment potential. By providing an in-depth analysis of a company, equity research can help you make sound decisions about what investments are best for you. It can also give you an edge over other investors who do not have access to this information. Investment bankers play an important role in our economy by helping companies raise the money they need to grow and expand. They provide an essential service by connecting companies with potential investors and helping to ensure that investments are made wisely.

Who can become an equity research analyst?

In order to become an equity research analyst, one must have a bachelor’s degree in a relevant field such as business, finance, or economics. In addition, it is helpful to have experience working in the financial sector. Finally, an equity research analyst must be able to effectively communicate their findings to both clients and colleagues.

What is financial modeling?

Financial modeling is the process of creating a detailed model of a financial situation. It is a tool that is used by investment professionals to help make informed decisions about investments, projects, or businesses. Financial models are based on extensive industry research and are used by portfolio managers and senior analysts at investment firms to make recommendations about which stocks or other assets to buy or sell. Private companies also use financial modeling to raise capital from investors. Financial modeling can be used to predict things like future cash flow, profitability, and risk. It can also be used to compare different investment options or to assess the impact of changing economic conditions. Financial modeling is a powerful tool, but it requires careful planning and analysis to produce accurate results.

What is private equity?

Private equity is an alternative asset class that refers to the investment of capital in privately held companies. A private equity fund manager typically invests in companies that are not listed on public stock exchanges and often takes an active role in driving the growth and management of these businesses. Similarly, a private equity analyst conducts due diligence on potential investments and provides recommendations to the fund managers. If you’re interested in getting into equity research, you’ll need to have experience in finance and accounting, as well as strong analytical skills.

What is an investment thesis?

An investment thesis is an argument or set of arguments used to justify why a particular security or group of securities is worth investing in. A strong thesis will be clear and concise, research-based, and backed by data. It should also be tailored to the investor’s specific goals and risk tolerance . An investment thesis can be applied to a wide range of investments, from stocks and bonds to real estate and commodities. Ultimately, the goal of an investment thesis is to help investors make informed decisions about where to put their money.

How can I get an equity research job?

There are a few ways to break into equity research from the outside. One is to network with people you know who work on Wall Street. Another is to look for job postings online, either on job boards or on the websites of an investment bank, wealth management firm, or any investment firm. Finally, you can try cold-emailing equity researchers at firms you’re interested in working for. Keep in mind that most equity research jobs are filled by people who have already worked as investment banking analysts or research associates at an investment bank. Aspiring equity researchers also need to be aware of the earnings season schedule and be able to produce high-quality research during that time. Equity research careers can be extremely rewarding, both financially and professionally. With a little effort, you can find a job that’s a perfect fit for your skills and interests.

What is the job of an equity research associate?

Equity research associates are responsible for analyzing companies and industries in order to support the investment decisions of senior analysts and portfolio managers. This involves conducting fundamental analysis, building financial models , and writing research reports. An equity research associate must have a strong understanding of accounting and finance, as well as experience with Excel and other financial analysis software. In addition, an equity research associate must be able to effectively communicate the findings to both senior analysts and clients. If the equity research associate is successful in this role, he may go on to become an equity research analyst or senior analyst.

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Equity Research Overview

A systematic process of analyzing the market position of a company to examine investment opportunities.

What Is Equity Research?

• Organization Of Equity Research Divisions
• Equity Research Report
• Equity Research Vs. Investment Banking
• Day In The Life Of An Equity Research Analyst
• Who Funds Equity Research?

Equity research can be defined as a systematic process of analyzing the market position of a company to examine investment opportunities.

Equity research (ER) professionals are in charge of analyzing, recommending, and reporting on investment opportunities that their clients, investment banks, or institutions may be interested in pursuing. 

Its main goal is to supply investors with precise financial analysis and recommendations on whether they should buy, hold, or sell a specific security. 

Analysis of a company’s financials using ratio analyses and forecasting its financials in Excel is a key part of the research process. 

It is often used to assist a bank’s investment banking and sales and trading clients by offering up-to-date, reliable information and analysis. 

Equity researchers analyze stocks in order to assist portfolio managers in making knowledgeable investment decisions. They utilize problem-solving skills, data analysis, and other tools to determine and forecast a particular security’s prospects. 

In order to assess a security’s behavioral outlook, equity researchers must quantitatively evaluate a stock’s statistical data relative to recent activity in the market. 

Other tasks of equity researchers include:

• Creating investment models and screening tools that recognize trading strategies that assist in the management of  portfolio risk .     
• Finding patterns in price changes in the current market and utilizing this data to develop algorithms that find profitable stock investment opportunities. 
• Comprehending peculiar differences among international markets so that they can analyze and compare domestic and foreign stocks. 

Key Takeaways

• Equity research is a fundamental component of the financial industry that involves analyzing and providing insights into publicly traded companies and their stocks.
• Equity researchers, often employed by investment banks, brokerage firms, or independent research firms, conduct in-depth analysis of companies to help investors make informed decisions about buying, holding, or selling stocks.
• Equity researchers analyze various aspects of publicly traded companies, including their financial performance, business operations, industry trends, competitive positioning, and growth prospects.
• Equity researchers study industry dynamics, market trends, regulatory developments, and competitive landscape to assess the potential risks and opportunities facing companies within specific sectors.

Organization of equity research divisions

If you are looking to pursue a career in ER, it is essential that you understand that it has a relatively flat organizational structure. On the other hand, investment banking is quite hierarchical. ER typically only has two main positions: Associate and Analyst. 

Equity is different from most other areas of corporate finance because the Analyst position is more senior than the Associate position. The Analyst usually has chief responsibility for covering a group of companies, and a few associates work for them. 

Typically, analysts are divided into various industry sectors to cover similar companies within a given industry. ER analysts need to have extensive specialized knowledge about the sector they work in, so most stay in one industry.

Some sectors of ER include healthcare, internet, technology, mining, telecommunications, consumer discretionary, and consumer staples. 

Usually, one team of analysts and associates covers 5 to 15 companies. Some factors that determine the number of companies a team covers include its seniority, company sizes, and industry. 

Producing reports is the main job of equity researchers. These reports may be “flash reports,” which are quick updates, or “initiating coverage” reports that are more in-depth. ER associates and analysts must be constantly publishing these reports. 

Additionally, equity researchers must be able to build financial models .

A typical ER firm also has a Head of Research who is in charge of managing the analyst team by leading, coaching, and guiding them to ensure that all goals are reached. 

The role of the Head of Research is to supervise the research reports and publications by editing and checking the accuracy of analysis and recommendations made to brokers. 

As a manager, the Head of Research is also responsible for hiring, paying, and training staff. 

Equity research report

An ER analyst arranges this document, which provides investors with insight into specific securities. In the report, analysts offer recommendations for buying or selling the security, along with its valuation and risks.

Components of an equity research report include:

1. Industry research 

This section of the report details the trends and competition in a specific industry. The industry's components to consider include the current social, political, economic, and technological environment. 

2. Overview of management and commentary 

It is essential that the report considers the nature and quality of the target’s management team. Equity researchers have direct access to management, so they have the ability to contribute value to the report. 

While individual investors do not have this ability, equity researchers can directly contact management and ask them questions about the business. They can then pass on that information to investors. 

3. Historical financial findings 

One of the fundamental tasks of ER is assessing financial results and comparing them to the guidance provided or to the analyst's expectations. 

A stock’s performance is primarily derived from reality vs. expectations. Analysts must be able to determine whether historical results were below or above market expectations. 

4. Forecasting 

Equity researchers must also be skilled in financial modeling and in producing both top-down and bottom-up forecasting. 

The top-down forecasting method first examines aspects of the industry, like its size, growth, and pricing. Then, the researcher must assess a company’s market share and eventually work down to revenue. 

The bottom-up method begins with the fundamental producers of revenue (e.g. units sold and the number of customers) and then works up to forecast revenue. 

5. Valuation 

Equity research analysts may be tasked with building financial models, such as 3-statement models and DCF models. These models are built from assumptions from the forecast and add more assumptions (e.g. valuation multiples or discount rates). 

6. Recommendations 

In this section of the report, the analyst will present a target price that advises the investors about the stock’s price in a year’s time. They also recommend whether or not the investor should buy, hold, or sell. 

The analyst will compare the security's fair price with the current market price . If the fair price is below the current market price, the security is considered overvalued , and the recommendation is to sell. 

The opposite is true if the fair price is above the current market price: the security is considered undervalued, and the recommendation is to buy. 

Equity research vs. investment banking

Investment banking has often been viewed as the top banking role for the best talent. However, many talented workers have been shifting toward pursuing management consulting , technology, or entrepreneurship because of the arduous hours required of investment bankers. 

Equity research is another great role for prospects who want to work in the financial services industry. While it is sometimes considered less attractive with lower compensation in comparison to investment banking, reality differs from this commonly-held perception.

Here are some of the key differences between equity research and investment banking.

Work-life Balance 

12-hour days are typical for equity researchers. However, their volume of work is usually highest while initiating coverage and during earnings season. 

Investment bankers have brutal hours, they commonly have 90- to 100-hour workweeks for analysts during the busiest times. 

Recently, there has been increasing backlash to the insane number of hours that investment banking analysts have to work. The common objection is that analysts experience burnout as a result of their lack of work-life balance. 

On the other hand, this complaint is rarely heard from equity researchers. 

Visibility 

ER associates and analysts often receive recognition for their work. Their names are usually on the research reports they compile for a firm’s sales force, client, and media outlets. 

Media outlets often seek out senior equity research analysts because they are recognized as experts on the companies in the sector that they cover. 

Conversely, investment bankers at the junior level do not have high visibility. However, their visibility can increase as they move up in seniority and are put on high-profile deals. 

Advancement

Investment banking has a clear path for career advancement. Analysts usually stay in their role for two to three years and then become associates for three or more years. After that, they can become vice presidents or managing directors. 

ER has a less clearly defined career path. The typical progression is from associate to analyst to senior analyst to the vice president or director of research. 

Upward mobility is more common for investment bankers because they are deal makers and service the firm’s largest clients. 

Education And Designations

A bachelor’s degree is necessary for both equity research analysts and investment banking associates. 

Typically, these degrees are in fields like economics or finance, but could also include anything from chemistry to computer science. 

However, further education and training are usually required to get a job in these fields. Equity researchers will often pursue the Chartered Financial Analyst ( CFA ) designation, which is almost considered mandatory for any equity researcher. 

Aspiring investment banking associates will typically pursue a Master of Business Administration ( MBA ) degree instead of the CFA because their role is more business-oriented. 

Many investment bankers pursue their Series 7 or  Series 63   FINRA licenses to demonstrate comprehensive knowledge of financial markets , investments, and company organization. 

Required Skill Sets

Both investment bankers and equity researchers must have excellent analytical, quantitative, and technical skills. 

However, this especially applies to equity research analysts because they must carry out complicated calculations, run projection models, and prepare financial statements with tight deadlines. 

Earlier in both careers, these professionals must practice financial modeling and in-depth analysis. However, later on, the skill sets of investment bankers and equity researchers diverge.

As they become senior, investment bankers take on more managerial and client-facing responsibilities. On the other hand, research analysts must have sufficient verbal and written communication skills to carry out analysis and due diligence . 

External Opportunities

Both professions have great external opportunities because of the extensive knowledge and skills required for these roles. 

Research analysts usually exit to the buy side , while investment bankers may end up in private equity or venture capital . The buy side includes institutional investors that purchase securities for money-management purposes. 

Compensation

Both professions are very well-paid; however, investment banking is the more lucrative career path. Investment bankers receive generous salaries and substantial sign-on bonuses. 

While investment bankers can receive commissions, research analysts are not able to be compensated for investment banking revenues. 

However, research analysts can receive bonuses that are based on the success of their recommendations, the firm’s profitability, and rankings. 

Day in the life of an equity research analyst

A day in the life of an Equity Research Analyst can be classified as a very busy one. This could include starting early and finishing late. This profession is particularly demanding. Let us see what a day in the life of an equity research analyst is like.

• Check emails from salespeople and traders.
• Analyze how all of the open global stock markets are doing.
• Assess all news that is related to your assigned industry sector.
• First, you will discuss recommendations with the sales & trading team.
• All analysts must present their research and opinions on important happenings in their sector. The head of Research will offer their opinions on the overall markets.
• Check for important developments in your sector. 
• Determine whether there have been any drastic price movements in the stock market. 
• Fulfill typical duties of a research analyst (i.e. updating financial models, completing client requests).
• Keep up to date with the news.
• Explain your work to buy-side clients.
• Analyze any movements in the market of the covered company at closure.
• Make sure the client is up-to-date with any relevant market information.
• Start a new research publication piece for the next few days.
• Typically, a research analyst will complete 1 to 2 research pieces per week.
• Unless there is an earning season, the analyst may now go home. 
• In the case that it is earnings season, the analyst must prepare the result update report for the next morning. 

Who funds equity research?

Independent ER firms do not have a sales & trading division. As a result, they carry out financial analysis and charge a fee on a per report basis. At major ER firms, brokerage trades earn  fee income . 

Fee income refers to the revenue that is created by a business operation by charging its customers a fee. 

Brokerage firms (made up of investment banks and stock brokers) give investment ideas to their clients ( mutual funds , institutional investors, and retail investors) and in turn, brokerage firms receive equity trades from their clients. 

Buy-side firms include hedge funds, insurance companies, and pension funds (among other things). Sell-side firms are typically investment banks (e.g. Goldman Sachs , Credit Suisse , JPMorgan Chase , etc.) 

The role of the buy-side firm is to manage the portfolio of security and seek advice on investment decisions from sell-side analysts. This advice is given to the buy-side analysts for free.

If the buy-side firm decides to invest in the security, it may want to carry out the trade through the sell-side firm’s trading division. 

In turn, the trading division of the sell-side firm will receive a commission for executing the trade at the lowest price. 

As a result, the commission is the earnings of the research firms. 

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Equity Research

• What is Equity Research?

Equity research refers to an area of finance that involves analyzing equities (i.e., stocks) to determine whether they are a good buy or not. People skilled in performing equity research are called equity research analysts.

Why Equity Research? – The Purpose

The main purpose of equity research is to provide insights into a company’s financial performance and highlight the potential risks posed to its investors. It enables investors to make informed decisions before entering into an agreement for buying a stock or bond. An equity report examines the strengths and weaknesses of a firm using its financial data. And presents them to the investors in a detailed manner and a detailed analysis. However, equity research only provides advice on the best stocks to invest in and is not mandatory for investors to follow the same.

• Why Equity Research? – The Purpose
• Types of Investment Firms – Buy Side & Sell Side

Topics Covered

Initiation of coverage, earnings update, rating update, technical skills, non-technical skills, who requires equity research.

Firms involved in investment activities require equity research. Examples are insurance companies, pension fund companies, asset management firms, etc. All the above equity research firms invest heavily in equity markets with an aim to receive good returns for their clients. Hence, it is very important for them to conduct an in-depth analysis of a particular stock or a sector before putting their client’s money into it. They completely or partially depend on the reports or suggestions generated by equity research analysts to make informed decisions. Therefore, these firms either have a dedicated equity research team in their organization or outsource this work to an independent research firm.

Types of Investment Firms – Buy Side & Sell Side

An equity research analyst typically works for two types of investment firms: Buy-side and Sell-side. Analysts working for companies on the buy-side are buy-side analysts, and people working for sell-side firms are sell-side analysts.

Also Read: Equity Research Analyst

Though the work done by the analysts for both buy-side and sell-side is almost the same, the difference lies in how the research materials are used. Analysts working for the buy-side are the clients for the sell-side analysts, i.e., all the research material prepared by sell-side analysts is catered to the people on the buy-side. They are available publicly and can be accessed by all the investors. Analysts on the buy-side use research material developed by the sell-side and their own research to buy or sell securities.

Let us examine the differences between buy-side and sell-side

Scope of Equity Research

The main aim of this research is to analyze the market trend. And observe how it is affecting companies’ earnings and their stock value. It focuses on a particular stock or a sector as a whole and captures all the information of the stock (or companies in a sector). It includes a review of its historical financial performance, a forecast of its future financial performance, supporting arguments for the estimates, and finally, a recommendation on whether to buy or sell the stock. Sell-side firms usually produce such detailed reports.

Broadly, topics covered in an equity research report are:

• A note on the historical financial performance of a company analyzed using various financial ratios
• The detailed description of how the analyst forecasts its financials would be in the near future and what are the resultant earnings values
• A brief note on the business operations of the company and the trends of the sector it is in
• Valuation – the value of the stock according to the analyst (using DCF or peer valuation techniques)
• Recommendation for buy or sell, supported by arguments

Kinds of Equity Reports

Different kinds of equity reports developed by leading investment banks are –

In this report, the analyst recommends the stock for the first time.

This report includes incorporating the changes in initiation reports to include the latest earnings.

To change the recommendation on the stock for any macro or microeconomic changes that happened recently.

Skills Required in an Equity Research Analyst

The list of work done by equity research analysts is ‘fundamental analysis.’ It includes a detailed analysis of financial statements, financial modeling, analyzing various ratios, valuation, forecasting financials, preparing earnings estimates, and drafting detailed reports on the particular company. Hence, an equity analyst job requires to possess the following skills to excel in his career.

Good understanding of financial concepts, excellent analytical skills required to analyze financial statements, financial modeling , good report writing skills, proficiency in different types of ratios, and hands-on experience in M.S. Excel.

Also Read: Equity Research Sell-Side

Attention to detail, good communication skills, ability to present the analysis succinctly, ability to prioritize tasks effectively, and a flair for updating self for any changes in the economy.

Also, read Equity Research Vs. Credit Research

RELATED POSTS

• Equity Research Buy-Side
• Equity Research Firms
• Equity Research Report
• Equity Research Vs. Credit Research
• All About an Equity Research Analyst Job
• Types of Equity Investments

Sanjay Bulaki Borad

MBA-Finance, CMA, CS, Insolvency Professional, B'Com

Sanjay Borad, Founder of eFinanceManagement, is a Management Consultant with 7 years of MNC experience and 11 years in Consultancy. He caters to clients with turnovers from 200 Million to 12,000 Million, including listed entities, and has vast industry experience in over 20 sectors. Additionally, he serves as a visiting faculty for Finance and Costing in MBA Colleges and CA, CMA Coaching Classes.

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What is an Equity Research Report?

One of the most powerful tools at investors’ disposal is equity research reports. Wall Street firms employ some of the sharpest minds in the industry who study companies with publicly traded stocks. These analysts delve into every aspect of the company, from its financial statements to its management team and competitors. Equity research reports provide solid analysis and the opinions of the analysts who follow the companies and their stocks extremely closely.

What Is an Equity Research Report?

An equity research report is a detailed report written by an analyst at a sell-side firm or independent investment research firm that analyzes the company’s business and finances and gives the analyst’s opinion of the company’s prospects and future stock price.

Analysts are experts in the companies’ businesses, finance, and industries they follow. They research a company’s financials, performance, and competitive landscapes. They also create models to predict metrics like future earnings per share, sales, and a target price for the stock.

Analysts keep a close eye on every move of the companies they follow and update their equity research reports at least once a quarter after the company issues its quarterly earnings report. If significant material changes occur mid-quarter, the analyst will write an update to their research report in a flash report.

An example of an equity research report is a report on Apple written by a sell-side analyst from Argus. This report includes the analyst’s analysis and opinions about the company’s financials and future revenue and earnings predictions. The report also provides the analyst’s target price estimate and rating.

Important Components of a Typical Equity Research Report

The typical equity research report includes components that dig into the company’s financials, industry landscape, risks, and other vital aspects that can materially affect the company’s future business performance and stock price.

Recent Results & Company Announcements

Shortly after a company announces its quarterly results, an analyst will issue a new equity research report. This report will include an analysis of the recent quarterly results, including EPS, sales, and various financial metrics like EBITDA and profit margins.

When releasing quarterly results, a company often makes announcements in a press release or through a conference call between management and the analyst community. The equity research report will include an analysis of these company announcements.

Organizational Overview and Commentary

An equity research report typically summarizes the company’s organizational structure. This summary outlines the management structure and the company’s major divisions.

If the company makes any significant structural changes, such as appointing a new CEO or shutting down a division, the analyst will discuss the implications of these changes in the equity research report.

Valuation Information

Perhaps the most impactful part of an equity research report is the valuation analysis provided by the research analyst. The analyst provides an overview of the company’s performance through this analysis.

The valuation information included within an equity research report includes margin analysis, EPS and sales estimates, the stock’s target price estimate, and other valuation and financial metrics calculated through a deep dive into the company’s financial statements.

An analyst uses a company’s reported results and their own research into the company’s operations and the industry to calculate various estimates. The most prominent estimate is the EPS estimate, the analyst’s estimate for earnings per share for future quarters and fiscal years. Analysts also calculate forecasts for sales, margins, and other financial metrics.

Many equity brokerage reports include a target price estimate, which is a short-term estimate for the stock’s price. An analyst may also issue a rating for the company’s stock, such as buy, sell, or hold.

Financial Histories

An equity research report typically contains financial data going back several years on both a quarterly and fiscal year basis. The analyst uses this financial data to perform an analysis of the company’s financial health and create projections.

While research reports typically do not include complete financial statements, the reports often include important line items, valuation ratios, and financial metrics in tables which the analyst will reference in the commentary.

Evaluating trends is a big part of an analyst’s job; equity research reports discuss these trends. The report includes trends like year-over-year and quarter-over-quarter growth rates for metrics such as EPS, sales, and margins.

The trend analysis gives an excellent overview of the growth of the company. For example, suppose sales significantly grew year-over-year, but EPS was stagnant. In this case, the company may be facing higher expenses, and the analyst will dive into the financial results and attempt to uncover the cause of the problem.

Many equity research reports include a section that describes the risks the company and investors may encounter. These risks may include economic headwinds, an increasingly competitive landscape, and company-specific risks like failed product launches or management changes.

In-Depth Industry Research

While analysts are experts on the companies they follow, they are also experts on the companies’ industries. Equity research reports include the analyst’s evaluation of the industry trends, the competitive landscape, and how the company’s prospects align with changes within the industry.

Buy Side vs. Sell Side: What Role Do Both Sides Play?

Buy-side and sell-side firms play different roles in financial markets, and it is vital to understand the role of each.

Buy-side firms, such as hedge funds, pension funds and asset managers, have money to invest. They buy stocks and other investments and are fiduciaries of their client’s money. Sell-side firms, such as brokerage houses, sell investments to their clients, including buy-side firms.

Sell-side firms employ analysts that write equity research reports. The sell-side firms provide these equity research reports to their buy-side clients. Buy-side firms use these equity research reports to help make investment decisions.

Other Types of Research Reports

Analysts produce several types of equity research reports. These include initiation of coverage reports, quarterly results reports, flash reports, and sector and industry reports.

Initiating Coverage Reports

When a sell-side firm begins covering a stock, the first analyst report is called an initiation of coverage report. This report gives the analyst’s first take on a company and its stock. Many investors pay attention to initiation of coverage reports because they provide a fresh perspective on a stock.

Quarterly Results Reports

After a company reports its earnings, an analyst will issue a new research report incorporating recent results. The analyst discusses the results and what went wrong and right in the last quarter. The analyst will also calculate new financial projections based on the results, company guidance, and management commentary.

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Flash Reports

Analysts issue flash reports when significant material changes involving the company, or the company’s industry, occur. An analyst may issue a flash report if the company’s CEO resigns, the company initiates a significant stock buyback program, or other major news breaks. In a flash report, the analyst will discuss the relevant news and how it may impact the company and its stock price.

Sector Reports

Sell-side firms also issue sector reports. The sector reports will dive into trends within the sector, a high-level analysis of the top companies in the sector, and past and future predicted performance of the stocks within the sector.

Industry Reports

Like sector reports, industry reports discuss the competitive landscape and major players within an industry. An industry is a subset of a sector. For example, the technology sector includes the semiconductor, personal computer, and cloud computing industries. Industry reports focus on a narrower industry rather than a broader sector.

Equity Research Report Example

Although each sell-side firm has a unique style for presenting analysts’ research in equity research reports, most contain similar types of information. Let’s conclude our discussion of equity research reports by looking at a recent Microsoft report written by Argus analyst Joseph Bonner after the company issued its fourth quarter 2022 results.

The report starts with several tables of key statistics, such as financial and valuation ratios and the analyst’s investment thesis. The table also includes the analyst’s rating and target price for the stock.

The report continues with the analyst’s investment thesis for Microsoft stock. This thesis briefly explains the analyst’s rationale for his Buy rating on MSFT stock.

A section detailing recent developments within the company, which the analyst derives from the company’s earnings report and conference call, is followed by a look at select financial data. An analysis of growth rates for several key metrics like revenue and margins leads to an overview of risks that investors of Microsoft may face.

Equity research reports offer investors a great way to harness the power of Wall Street analysts. These analysts live and breathe the companies they follow. Investors can use their expertise to advise them in the investing process.

10 Powerful Golden Rules To Write Equity Research Report

What is an Equity Research Report?

An equity research report is a document that includes information about company stock, such as its target share price, recommendation (whether to buy, hold, or sell), key statistics, and graphs to help investors make investment decisions. Financial analysts or equity research analysts working for either sell-side or buy-side firms write equity research report.

Clients for these reports generally include retail brokers, pension and mutual fund houses, wealth management firms, individual clients, and hedge funds .

These reports include detailed company financial performance analysis, industry outlook, competitive landscape, and market trends. Therefore, they serve as valuable resources for both experienced investors and those new to the financial markets.

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Table of Contents

How to write equity research report.

• Real Company Templates

Report Writing Tips

Here’s a detailed format you can follow to write equity research report:

1. Company Name and Logo This is the first thing you will see at the top of the report. It includes the name and logo of the company.

2. Date of the Report The issue date of the report is important for reference, as market conditions and company performance can change over time.

3. Report Title A concise and informative title that encapsulates the main focus of the report. It should give readers an idea of what to expect from the content.

4. Target Price and Recommendation This section provides an estimate of the stock’s future value, often referred to as the “target price.” Alongside this, the analyst typically includes a recommendation on whether to buy, hold, or sell the stock.

5. Stock vs. Index Graph A graphical representation that compares the performance of the company’s stock to a relevant market index, such as the S&P 500 or an industry-specific index. This helps investors gauge how the stock has performed relative to the broader market.

6. Stock Data This section provides detailed data about the company’s stock performance. It may include historical price charts, trading volume, price-to-earnings (P/E) ratios, earnings per share (EPS), dividend yield, and other relevant financial metrics.

7. Financial Analysis A detailed examination of the company’s financial statements, including income statements, balance sheets, and cash flow statements. The analysis may cover metrics such as revenue growth, profit margins, debt levels, and liquidity.

8. Valuation Methodology Explanation of the methods used to arrive at the target price, which may include discounted cash flow (DCF) analysis, comparable company analysis (comps), and precedent transactions analysis.

9. Investment Report Summary A concise overview of the key points covered in the report. It highlights the company’s strengths, weaknesses, opportunities, threats (SWOT analysis), recent developments, and the rationale behind the target price and recommendation.

Follow the below steps to write equity research report accurately. For a downloadable equity research report template of Tesla Inc., check our article – Equity Research .

1. Gather complete information about the company. You need to have a clear view of the company regarding Investment rationale, risk assessment , key growth drivers, cost drivers, and revenue drivers. You can collect the required information from the company’s official site or any financial tools like Yahoo Finance, Forbes, or Reuters.

2. Create a financial model and perform valuation analysis. Use all the collected information to make a financial model for the company to project its performance for the next 2-3 years. After creating a financial model, perform an extensive valuation analysis using any valuation method, like DCF , relative valuation, etc.

3. Mention the company name and current target price. State the company’s name at the top of the research report and the stock’s calculated target price after that.

4. Write an executive summary and add your recommendation/rating. Add a quick summary about the company, mentioning its position in the industry, and after that, properly mention the recommendation or rating. Ratings in the equity research report fall into these categories:

• Buy/Outperform: Investors must consider buying or adding stock holdings as the stock price may increase.
• Hold/Neutral: Investors must maintain their current stock holdings but not necessarily buy more stocks, as the stock may perform in line with the market.
• Sell/Underperform: Investors can consider selling the stock as the stock might not perform well.

5. Record a detailed overview of the company and its market. Write about the company’s history, products, strategies, current market situation, as well as the market or industry’s current conditions and trends. Also include information about the financials, management, future plans of the company, growth estimates, etc. It should be a detailed description of the company and the market it is based in.

6. Add share price chart and other stock-related data. Include the stock’s price chart showing its last 1 year’s price movements. You must also add these important segments:

• Ratio analysis of the company
• 52-week high-low share price on a stock exchange.
• Market capitalization, Enterprise Value, EBITDA, EV/EBITDA, dividend yield, etc.

7. Provide valuation analysis details and results. Provide an in-depth explanation of how you performed your valuation analysis, including the valuation methods you used and the final valuation result.

 8. Provide information about the risks. You will also have to clearly state potential risks associated with the company’s stock, your analysis, and your recommendation.

9. Mention your interpretation of the recommendation. While providing recommendations, you must have strong reasons to support them. Thus, mention appropriate reasons for your recommendations and write about why you think the share price will go up or down. Here are a few factors you can mention:

• Financial Health: Review of the company’s past and expected financial performance, including revenue growth, earnings, profit margins, and debt levels.
• Industry Analysis: Evaluation of the company’s position in its industry, market share, competitive advantages, and potential industry-related risks.
• Risks: Identification and evaluation of company-specific and broader economic risks that could affect the stock’s performance.
• Valuation: Analysis of the stock’s current value compared to its history and peers, using metrics like P/E ratio, P/B ratio, and DCF analysis.
• Potential Drivers: Upcoming events, product launches, regulatory changes, or other factors that could impact the stock’s performance.

10. Present a quick summary and cite the sources.

At the end of your report, write a crisp and clear conclusion for your report and properly cite all the sources you used for your research.

The main types of equity research reports are:

1. Initiation Reports

When an analyst covers a company for the first time, they write an initiation report. As it is the first report on the company, it is a comprehensive report containing information about the overview of the company, its stock, industry, competitive landscape, future prospects, and more.

2. Quarterly/Annual Results Update Report

This report is also known as a company update, result update, or company note. It comprehensively analyzes a specific company, including its financial performance, history, valuation, growth prospects, risks, etc. Companies release these on a regular basis, often quarterly or semi-annually.

3. Industry and Sector Reports

These reports provide analysis and insights into specific industries or sectors. They discuss industry overview, trends, challenges, growth prospects, key players, etc. These are especially useful for investors and analysts to assess the opportunities and risks associated with investing in companies within that industry or sector.

4. Flash Reports

Flash reports provide quick insights into breaking news or development, like earnings announcements, regulatory updates, mergers and acquisitions, CEO resignations, etc. They are concise and include a brief event summary, initial reactions, stock valuation, and other impacts. These reports are essential for traders and investors who must make quick decisions based on breaking news.

Real Company Reports – Templates

Every company might follow a slightly different format or template to write equity research report. Here are a few examples of real company equity reports.

#1: J.P. Morgan’s report on 21st Century Fox

(Source: Amazon AWS)

#2: Credit Suisse’s report on J.P.Morgan Chase & Co.

(Source: Credit Suisse)

#3: WUTIS’s report on Expedia Inc.

(Source: Seeking Alpha)

• Know Your Audience: Write equity research reports according to your audience’s (individual, institutional, professional) needs.
• Clear Structure: Use a proper structure for your report. You can also do this by following a readymade template.
• Visuals: Include charts, graphs, and tables for clearer data representation and understanding.
• Consistency and Clarity: Maintain a uniform tone, avoid using complex terms, and explain technical terms in simpler language.
• Proofread and Edit: After writing the report, check for grammar, spelling, and formatting errors.
• Legal and Ethical: Make sure you adhere to legal and ethical standards and disclose any conflicts.
• Regular Updates: Always try to update your report regularly to maintain the accuracy of your recommendations.

Equity research reports are important for various reasons:

• They guide investors in making informed choices about buying, holding, or selling stocks.
• It provides insights into a company’s financials, helping determine if a stock is undervalued, overvalued, or fairly priced.
• They also help maintain trust by requiring analysts to explain recommendations and disclose conflicts.
• Businesses can use these to compare their financial performance with industry peers.

Frequently Asked Questions (FAQs)

Q1. what is the best equity research report writing course.

Answer: Equity research report writing is crucial for financial analysts and investors as it provides in-depth insights into companies’ financial performance and prospects. EDUCBA’s Equity Research Analyst Certification Course Bundle offers comprehensive training in equity research, financial analysis, and report writing. It covers topics like financial modeling, valuation techniques, industry analysis, and report creation, enhancing your skills for a successful career in finance.

Q2. Who are the clients for equity research reports?

Answer: All the possible lists of investors given below are the clients for such equity research reports.

• Pension and mutual fund managers
• Institutional salespeople
• Wealth management specialists
• Retail brokers servicing individual clients
• Hedge funds

Q3. What are some useful financial websites for writing equity research reports?

Answer: Financial institutions, investment banks, and research firms often generate equity research reports. You can access them through these organizations’ websites, subscription-based financial databases, and financial news platforms. Here are a few sources you can refer to for equity research reports:

• Market Watch
• Money Control

Q4. Who creates equity reports?

Answer: Equity research analysts and teams within financial institutions typically create equity reports. These professionals conduct thorough research on companies and industries to compile their findings into comprehensive reports offering recommendations. The two types of financial institutions that write equity research report are:

• Sell-Side Research Reports: It is when analysts working for brokerage firms or investment banks prepare a research report to provide insights and recommendations to clients, typically institutional investors, retail investors, and fund managers.
• Buy-Side Research Reports: Analysts who work for asset management firms, hedge funds, and other institutional investors write equity research reports to check if a potential investment opportunity aligns with their firm’s investment strategies.

Recommended Articles

This article on how to write equity research report presents a detailed explanation of what equity reports are, their format, writing process, tips, and templates. For more information, refer to the following articles,

• Equity Research Career
• Equity Research Jobs
• Financial Modeling in Excel
• Types of Financial Models

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Equity Research

Investment banking, key differences, special considerations, the bottom line.

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Equity Research vs. Investment Banking: What's the Difference?

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Equity Research vs. Investment Banking: An Overview

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. Equity research is also another destination for prospective financial employees.

Equity research is sometimes viewed as the unglamorous, lower-paid cousin of investment banking. The reality, though, differs from this widely held perception. 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.

Key Takeaways

• A career in finance can take many paths, including investment banking and equity research.
• Investment bankers work on M&A deals and issue new securities to the market.
• Equity researchers conduct thorough analysis and research of companies and their share price to issue investment recommendations.
• Each role has different responsibilities and hours, which will suit prospective candidates differently.
• The pay for investment bankers is a bit higher in the early career stage, especially when bonuses are included, and this gap further widens over the course of a career.

Equity researchers analyze stocks to help portfolio managers make better-informed investment decisions. Equity researchers employ problem-solving skills, data interpretation, and various other tools to understand and predict a given security’s behavioral outlook.

This often involves quantitatively analyzing a stock’s statistical data in relation to recent market activity. Finally, equity researchers may be tasked with developing investment models and screening tools that identify trading strategies that help  manage portfolio risk .

Equity researchers are responsible for identifying patterns with current market price changes and using this information to create algorithms that identify profitable stock investment opportunities. The equity researcher should be able to understand the idiosyncratic differences between various international markets in order to cross-compare domestic and foreign stocks.

The low end of the salary range is $52,000, while the high end sits at $147,000. The average salary is over 93,000 as of 2024. 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.

Investment banking is a specific division of banking related to the raising of capital for other companies, governments, and other entities. Investment banks underwrite new debt and equity securities for all types of corporations; aid in the sale of securities; and help to facilitate  mergers and acquisitions , reorganizations, and broker trades for both institutions and private investors.

Investment banks also provide guidance to issuers regarding the issue and placement of stock. Investment banking positions can include elements of consulting, banking, capital market analysis,  research , trading, and much more. Each requires a specific skills to be developed.

A degree in finance, economics, accounting, or mathematics is a good start for an investment banking career. However, most investment banking jobs focus their recruiting on elite universities.

Those interested in investment banking should strongly consider pursuing a  Master of Business Administration  (MBA) or other professional qualifications.

Great people skills are a huge positive in any investment banking position. Even dedicated research analysts spend a lot of time working as part of a team or consulting with clients. Some positions require more of a sales touch than others, but comfort in a professional social environment is key. Other important skills include communication skills (explaining concepts to clients or other departments) and a high degree of initiative.

1. Work-Life Balance

Equity research is the clear winner here. Although 12-hour days on weekdays are the norm for equity research associates and analysts, there are at least phases of relative calm. The busiest times include initiating coverage on a sector or specific stock, and earnings season when corporate earnings reports have to be analyzed rapidly.

The hours in investment banking are almost always brutal, with 60-80 hours per week being a baseline for investment banking analysts (the lowest on the totem pole). During busy times, work weeks can be up to 100 hours or more.

There has been a growing backlash against the atrocious hours demanded by investment banking analysts. In response, Goldman Sachs has enacted a rule guaranteeing that bankers will not have to work between 9 p.m. Friday and 9 a.m. on Sunday. These restrictions may do little to change the "work hard, play hard" culture of investment banking.

The most common complaint of those who have quit investment banking is that the total lack of work-life balance leads to burnout. That complaint is seldom heard from those employed in equity research.

Major financial jobs tend to be concentrated in major financial hubs such as New York, Chicago, London, and Hong Kong. This is no different for equity research analysts and especially investment bankers, many of whom are paid to relocate to their firm's home city.

2. Visibility

Equity research is the winner in this area as well. Associates and junior analysts often receive recognition for their work by being named on research reports that are distributed to a firm's sales force, clients, and media outlets.

Since senior analysts are recognized experts on the companies they cover in a sector, they are sought after by the media for comments on these companies after they report earnings or announce a material development.

Investment bankers, on the other hand, toil in relative obscurity at the junior level; however, their visibility increases significantly as they climb the investment banking ladder, especially if they are part of a team that works on large, prestigious deals.

3. Advancement

Investment banking wins in this area. There is a clear path with defined time frames for career progression in investment banking. This begins with the analyst position (two to three years), then transitions to an associate position (three-plus years), after which one is in line to become a vice president and eventually director or managing director.

The career path in equity research is less clearly defined but generally goes as follows—associate, analyst, senior analyst, and, finally, vice president or director of research. Within the firm, however, investment bankers probably have better prospects for reaching the very top, since they are deal makers and manage relationships with the firm's biggest clients.

Research analysts, on the other hand, might be viewed as number crunchers who do not have the same ability to bring in big business.

4. Job Functions

Investment banking probably wins here as well, albeit only over the longer term. Equity research associates start off by doing a lot of financial modeling and analysis under the supervision of the analyst who is responsible for the coverage of a specific sector or group of companies.

Also, associates also communicate to a limited extent with buy-side clients, top management of the companies under coverage, and the firm's traders and salespeople. Over time, their responsibilities evolve to less financial modeling and a greater degree of report writing and formulating investment opinions and theses; however, there isn't a great deal of variability in the job functions of associates and analysts. What varies is the relative time spent on these functions.

Investment bankers, on the other hand, spend the first few years of their careers immersed in financial modeling, comparative analysis, and preparing presentations and pitchbooks . But as they climb the ladder, they get the opportunity to work on exciting deals such as mergers and acquisitions or initial public offerings.

Research analysts only get this opportunity occasionally, when they are brought "over the wall" (the "wall" refers to the mandatory separation between investment banking and research) to assist on a specific deal involving a company that they know inside out.

5. Education and Designations

A bachelor's degree is a must for any aspiring equity research analyst or investment banking associate. Common areas of study include economics, accounting, finance, engineering, computer science, mathematics, or even physics. While it is possible to get hired with just a bachelor's degree, further qualifications can be used to get hired. They are also great for furthering one's career.

The difference between an equity researcher and an investment banker is determined by what post-graduate credentials are usually obtained. Most equity researchers earn a Chartered Financial Analyst (CFA) designation and most investment bankers get a Master of Business Administration (MBA) degree.

The CFA, widely regarded as the gold standard for security analysis, has become almost mandatory for anyone wishing to pursue a career in equity research. But while the CFA can be completed at a fraction of the cost of an MBA program, it is an arduous program that needs a great deal of commitment over many years. Being a self-study program, the CFA does not provide an instant professional network as an MBA class does.

The MBA curriculum, by virtue of being more business-oriented and less investment-oriented than the CFA, makes it more suitable for the investment banking profession; however, the competition to get into the best business schools—which is where most Wall Street firms hire their associates—is intense. Many aspiring investment bankers enter into some other financial field, perhaps working as analysts or advisors, and work toward their MBA.

Investment Bankers are required to pass the FINRA Series 79 Investment Banking Representative Exam.

6. Skill Sets

Both jobs require a great deal of analytical and mathematical/technical skills, but this especially applies to equity research analysts. These analysts need to be able to perform complex calculations, run predictive models, and prepare financial statements with quick turnarounds.

As noted earlier, financial modeling and in-depth analysis are common to both investment bankers and research analysts in the earlier stages of their careers. Later on, the skill sets diverge, with investment bankers required to be adept at closing deals, handling large transactions, and managing client relationships.

Research analysts, on the other hand, need to be effective at both verbal and written communication and have the ability to make balanced decisions based on rigorous analysis and due diligence .

7. External Opportunities

Successful research analysts and investment bankers generally have no shortage of external opportunities because of their experience, knowledge, and skills. Research analysts are likely to gravitate toward the buy-side (i.e., money managers, hedge funds, and pension funds), while seasoned investment bankers usually join private equity or venture capital firms.

8. Barriers to Entry

Both investment banking and equity research are difficult areas to get into, but barriers to entry may be slightly lower for equity research. Investment banking tends to draw more applications, due to prestige and higher pay.

9. Conflicts of Interest

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. This was highlighted by the U.S. Securities and Exchange Commission's (SEC)  enforcement actions against 10 leading Wall Street firms in 2003, relating to analyst conflicts during the telecom/dot-com boom and bust of the late 1990s and early 2000s.

Under the settlement, the firms paid disgorgement and civil penalties totaling $875 million, among the highest ever imposed in civil securities enforcement actions. The 10 firms also had to agree to undertake a host of structural reforms designed to completely separate their research and investment banking arms.

10. Compensation

Both investment banking and equity research are well-paid professions, but over time, investment banking is a much more lucrative career choice.

Investment bankers are famous for their high pay and large signing bonuses. According to the online finance community "Wall Street Oasis," summer interns earn the equivalent on a pro-rata basis of around $77,000, plus a signing bonus of around $6,000 . First-year analysts earn an average salary of $80,239 in 2024, plus bonuses, according to PayScale.

Total compensation will vary greatly depending on job location, company, and the employee's performance review.

The real moneymakers, however, are investment banking associates, who earn between $150,000 and $200,000, with a 50% to 100% bonus. It is not unusual for total compensation for a senior vice president or managing director to exceed $400,000 annually.

The average equity research analyst earns over $93,000 in annual compensation in 2024, according to PayScale, plus a bonus. While it's higher than investment banking analysts starting out, this profession doesn't typically see the same magnitude of bonuses or salary growth as the career progresses. Research analysts indirectly generate revenues through sales and trading activities that are based on their recommendations.

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.

Instead, research analysts are compensated over and above their salaries from a bonus pool. These periodic bonuses are determined by a number of factors including trading activity based on the analysts' recommendations, the success of such recommendations, the profitability of the firm, and its capital markets division and buy-side rankings.

Nonetheless, due to larger bonuses, entry-level investment bankers may receive total compensation that is higher than their research counterparts, and this gap may widen markedly over time.­

Is Equity Research the Same As Investment Banking?

No, equity research is not the same as investment banking. Both jobs have similarities but clear distinctions in overall purpose. Equity researchers evaluate companies with the goal of making investment recommendations. They analyze a company in all aspects, from its financials to its competition to its industry outlook, and its share price, to determine how the company might perform in the future and how its share price might move. Investment bankers also analyze companies in a similar fashion, but their goal is to determine whether a company is suitable for a merger or acquisition.

What Skills Do You Need for an Equity Research Job?

The skills required for an equity research job include an understanding of finance, economics, and accounting. An equity researcher must be able to analyze a company's financial statement. Equity researchers should also know financial modeling, Excel, and valuation methods. In addition to the quantitative skills required, equity researchers should be able to write well as they will be writing investment recommendations based on their quantitative analysis.

How Many Hours Does an Equity Research Associate Work?

An equity research associate typically works 55 to 60 hours per week, which can increase to 70 to 80 hours per week during earnings releases. Typically, equity researchers do not need to work weekends. The hours for an equity research associate or analyst are often less than that of an investment banker, who often has to work weekends.

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.

Payscale. " Average Equity Analyst Salary ."

Mergers and Inquisitions. " The Equity Research Associate: Remnant of a Dying Industry, or the Hero That Gotham Deserves ."

Career Principles. " Investment Banking Hours: The 100-Hour Work Week ."

Forbes. " After Complaints of ‘100-Hour’ Workweeks, Goldman Sachs Is Allowing Bankers To Take Off on Saturdays ."

FINRA. " Series 79 – Investment Banking Representative Exam ."

U.S. Securities & Exchange Commission. " Ten of Nation's Top Investment Firms Settle Enforcement Actions Involving Conflicts of Interest Between Research and Investment Banking ."

Wall Street Oasis. " What Is a Summer Analyst (SA)? "

PayScale. " Average Investment Banking Analyst Salary ."

Wall Street Oasis. " Investment Banker Salary & Compensation, Average Bonus in Banking ."

PayScale. " Average Equity Analyst Salary ."

U.S. Securities and Exchange Commission. " Commission Approves Rules To Address Analyst Conflicts; SEC Also Requires Edgar Filings by Foreign Issuers ."

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What do you actually do in equity research.

If you're interested in breaking into finance, check out our Private Equity Course  and Investment Banking Course , which help thousands of candidates land top jobs every year.

Equity Research

The specific responsibilities of an equity research analyst can vary quite a lot on a day-to-day basis but still follow a predictable pattern over the course of a quarter. Let's look at what the typical day of someone in equity research looks like.

Broadly speaking, the pace of work you’ll be doing outside of earnings season is slower than the sprint associated with publishing reports during earnings. Let’s start with a normal day outside of earnings first.

Earnings season refers to one of four periods in a year when companies you cover report their results for the most recent quarter.

If you're interested in breaking into equity research, check out our course , which will teach you all of the modeling, valuation, stock pitching, and recruiting strategy you need to get the job.

Outside of Earnings Season

Equity research analysts typically start their day around 7 AM. At most investment banks, that’s around the time when the Morning Call is held, which is where equity research analysts present their most recent actionable reports and trade ideas to the sales team.

As the sales team is generally one of the first points of contact between clients and a new piece of research, they ask the presenting equity research analysts questions to refine their own understanding of the pitch by anticipating what their clients might later ask them.

Attending the morning call is optional, though senior analysts aim to make many appearances throughout the year to broaden their reach. As a junior, you’re likely going to attend to learn from other presenters or to help answer some questions that you're better equipped to handle. On occasion, you might be asked to speak as well.

Keeping Up with News

After the morning call, you’ll spend a large portion of your day keeping up with news and events relevant to coverage.

As a new hire, you’ll spend a considerable amount of time after hitting the desk ramping up on your coverage by reading news and industry reports. You’ll need to have an understanding of overall economic trends and market developments to the extent that they impact the stocks you cover, whether directly or tangentially.

More seasoned employees still spend a lot of time finding insightful news to stay current and continue to refine their views.

Generally, you’re going to get hundreds of emails a day based on alerts you’ve set up to capture any announcements which could be impactful for your coverage, so expect to spend a good amount of time sifting through those to see what matters.

Publishing Reports

These are the most common types of reports you’ll create outside of earnings season:

Company Initiations – Equity research teams publish Initiation of Coverage reports when they assume coverage of a new stock. These reports establish the team’s initial rating and views on a company and include detailed information on its business model, competitive landscape, and key financial metrics. From the reader's perspective, they’re a great source of information for someone who’s starting to learn about a company or industry.

Rating Changes – Published to revise a team's rating on a stock. These reports often have a significant impact on a stock's price especially when the publishing team is well-followed by investors and the broader media. These reports include the rationale behind the rating change and a new price target when applicable.

Price Target Revisions / Model Updates – Issued when a team changes the valuation methodology used to value a stock, or alongside publishing a model update which changes the financial metric inputs into an existing valuation framework. These reports also tend to be stock-moving, depending on the influence of the analyst team.

Thematic Reports / Industry Updates – These reports focus on broad themes specific to an equity research team’s coverage. They are normally longer-term projects that are worked on over several weeks or longer.

Interacting with Clients

Throughout the day, you’ll speak with the sales team to set up calls with clients they manage. You’ll also be expected to keep the trading team updated on certain stock-moving news, especially as traders are spread too thin to keep track of relevant news across all the stocks they trade.

Both sales and trading can be thought of as another client to equity research, as the same rules which govern interactions between outside clients and equity research also apply to anyone outside of the equity research department within an investment bank.

You'll speak with many types of clients on the job which exposes you to different investing styles and stock theses.

What Kinds of Requests Do You Get from Clients?

Data / Industry Model Requests – Equity research analysts often get requests for the large datasets of industry-specific metrics they maintain. Clients often ask for these datasets to use in their own analysis or models and ask equity research to help them interpret any trends.

Company Model Requests – These requests come from clients who want to compare their predictions with your team’s. They also typically ask questions about specific assumptions in your model, such as why you might be forecasting 3Q23 revenue growth that’s 200 basis points higher than management’s most recent guidance, for example.

Industry Calls – Industry calls are requested by investors who are new to the space or by those who have recently picked up coverage of a stock in your coverage. You typically discuss overall market trends, your future expectations, and the nuances of analyzing the industry from your perspective.

Specific Company Calls – These calls happen when a client wants to learn more about your view of a particular company. You would discuss your rating on the stock, talk about recent price movements, and answer questions about potential risks to your view (i.e., what would it take to change your rating on the stock?).

During Earnings Season

Earnings season is the time when publicly traded companies release their quarterly financial reports. These reports give equity research analysts actual data to which they can compare their prior estimates, and provide a new set of data points to inform forecasts for future periods.

Earnings season happens four times a year. It's usually a really hectic time for equity research analysts due to the speed at which they have to synthesize a lot of new information to publish reports.

Responsibilities During Earnings Season

Earnings Previews – During the days leading up to a company reporting its earnings, you’ll write an earnings preview note which gives investors an idea of what to expect from the upcoming release. These notes can be used to reiterate an equity research team's views, or as a final opportunity to change estimates reflecting any new information they may have gathered before an earnings release.

Set Up the Model – The day before an earnings release, equity research juniors set up the models for upcoming releases by building and formatting a variance table , which just shows how actual reported results differed from the analyst’s expectations, consensus estimates, and any previous management guidance.

Write a First Take Note – In the U.S., core stock market hours are from 9:30 AM to 4:00 PM on weekdays. Companies release their financials either before the market opens (generally around 7 AM, or sometimes earlier) or after the close, typically around 4:30 PM .

When results hit, you’ll have ~30 minutes to analyze the financials and publish what’s known as a “first take” note. While there's a lot of stress that comes with writing, proofreading, and publishing a note in such a short time frame, these notes are generally pretty simple. They include high-level takeaways from a company’s earnings results and include a variance table.

Get On the Earnings Call - After an earnings release, a company’s management hosts an earnings call where they discuss the results of the previous quarter, issue guidance, and answer questions from the equity research analyst community.

As a junior, you’ll be using this time to update the model based on any new insight you can gather from the call, and take copious notes which you’ll use to write a final note to wrap up that company’s earnings season. Your senior analyst will be using that time to come up with engaging and insightful questions to ask the management team on the call. You’re likely to do some of this part of the job too, even at the junior level.

Update the Model and Publish a Final Takeaways Note – Finally, you’ll write a key takeaways note to summarize the company’s earnings release and management call, and highlight any changes to your modeling or investment thesis. These notes generally include price target revisions, and upgrades or downgrades to the overall rating when warranted.

Overall, the responsibilities of an equity research analyst can vary quite a lot on a day-to-day basis but still follow a predictable pattern over the course of a quarter. The main responsibilities include keeping up with relevant news and events to inform your views around a group of stocks or industries, which are shared with clients through research reports and live interactions.

Recent Posts

Equity Research Overview

Why Equity Research?

Breaking Into Equity Research with No Finance Background (Using Data)

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Is Vanguard Equity Income Admiral (VEIRX) a Strong Mutual Fund Pick Right Now?

Large Cap Value fund seekers should consider taking a look at Vanguard Equity Income Admiral ( VEIRX Quick Quote VEIRX - Free Report ) . VEIRX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Large Cap Value mutual funds invest in stocks with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value; this value investing strategy often leads to low P/E ratios and high dividend yields, though growth levels are often curtailed. The high-growth opportunity of these funds are slowed even further, as large-cap securities are generally in stable industries with low to moderate growth prospects. Therefore, Large Cap Value funds are usually more appealing to investors who are interested in a stable income stream.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VEIRX. The Vanguard Equity Income Admiral made its debut in August of 2001 and VEIRX has managed to accumulate roughly $52.59 billion in assets, as of the most recently available information. The fund's current manager, Sharon Hill, has been in charge of the fund since February of 2021.

Performance

Investors naturally seek funds with strong performance. VEIRX has a 5-year annualized total return of 11.1% and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 8.94%, which places it in the top third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, VEIRX's standard deviation comes in at 15.5%, compared to the category average of 0%. The fund's standard deviation over the past 5 years is 16.64% compared to the category average of 96%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 0.82, the fund is likely to be less volatile than the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. Over the past 5 years, the fund has a negative alpha of -1.33. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, VEIRX is a no load fund. It has an expense ratio of 0.18% compared to the category average of 98%. Looking at the fund from a cost perspective, VEIRX is actually cheaper than its peers.

While the minimum initial investment for the product is $50,000, investors should also note that each subsequent investment needs to be at least $1.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, Vanguard Equity Income Admiral ( VEIRX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, better downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

Want even more information about VEIRX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.

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Update on the Equity and Inclusivity in Research Funding Action Plan

Research Services have made progress in implementing the recommendations from Oxford's Equity and Inclusivity in Research Funding report , which was published in 2023.

Following the development of the Research and Innovation Committee-approved Equity and Inclusivity in Research Funding Action Plan , a working group was set up with membership drawn from across the four academic divisions and the University Administration and Services (UAS), including people with expertise in Equality, Diversity and Inclusion (EDI), IT, HR and funding scheme management. The group is progressing actions in the plan including collating details of various funding schemes across the University for EDI review, reviewing and improving data around funding applicants, developing tools for equity in research funding, and strengthening EDI leadership. 

Working with over 30 UK Universities, a sector-wide forum has also been set up and its members have signed up to a joint statement which outlines the priorities that they will work on together. Task groups led, among others, by Birmingham, Nottingham, Oxford, and King’s College London, are in place and have started working on the priorities around demand management, positive action, and mapping funding support. A summary of outputs from the sector event in February was published in June. A reflection of the process was published in Wonkhe in July.  

The task groups met throughout the summer and the first inaugural meeting for the forum is planned in the autumn.  For more information on this project, please contact Thandie on [email protected] .

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