what is an equity research report

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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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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.

Get the guide

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

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Equity Research Report

Step-by-Step Guide to Understanding an Equity Research Report

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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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An Ultimate Guide to Equity Research

We have all heard the adage that information is power - this could not ring more true than it does with financial planning, investments, and M&A.

With this idea in mind, the function of equity research is to provide high-level information and analysis of a company (or sector) so that other companies can in turn use this information to guide investments and investment banking M&A transactions. 

This work is completed by professionals on both the buy-side and the sell-side .

Specifically, on the sell-side, the equity research division is comprised of analysts and investment bankers, while on the buy-side it is usually a division of senior analysts that work directly for the company.

They study small groups of stocks (about ten - give or take) within a specific industry, becoming experts in their domain, and produce formal reports to communicate their findings, namely whether clients should buy, sell, or hold stocks.

In this article we, at DealRoom, will explore investment banking vs. equity research as well as equity research buy-side vs. sell-side. We provide software solutions for deal management for all of them and have some interesting insights to share with you.

Let's start with equity research definition.

What is equity research?

Equity research, often referred to as ‘securities research’, is the process through which investment bankers and other investment firms like asset managers and investment funds invest equities and decide on whether they’re attractive investments.

The people responsible for this process - equity analysts - typically produce 3-6 page documents outlining the prospects for the equity in question in the context of the business, its management, and the wider industry and economic picture.

The bigger the investment bank or investment firm, the more reports that they’ll tend to churn out, and the more detailed the analysis included will be.

Examples of the kind of analysis would include:

• Commentary on how the macroeconomic picture is likely to affect the company
• Operational changes or investments that are likely to affect the company’s performance
• Reviews of the company’s financial statements and explanations of movements therein
• Projections on where the company’s revenues (and share price) are headed.
• Recommendations on whether to buy, hold, or sell the company’s equity.

How is equity analysis conducted?

In a word, research.

And lots of it, both primary (talking with the company’s investment relations team) and secondary (reading industry reports, etc.).

The equity analyst, usually part of a team, looks at scenarios that the company could face, and how that will affect the company’s financials, and by extension, its fundamental valuation.

The aim is to gain a more informed picture of the company’s prospects in the coming period.

Usually this research is conducted on an ongoing basis.

Companies employ investment relations teams to speak with equity analysts on an ongoing basis, and the annual report is always the subject of an investor call, where the CEO answers questions from senior equity analysts from high profile investment banks.

Piecing all of the information together, allows the equity analyst to generate a valuation, which can then be compared with the company’s share price, enabling them to make a statement on whether investors should buy, sell, or hold the equity in question.

What is equity research report

Whether a report is a buy or sell- side equity research report, it is prepared by an analyst and usually include the following:

• An industry research overview, including trends and news related to competing companies
• Company overview, specifically any new information as well as quarterly results
• Investment thesis, which is the analyst explaining why he/she thinks the stock will or will not perform well; the share target price is also included here - many consider this the most important piece of the report
• A forecast of the company’s income, cashflow, and valuation produced from a financial model
• Risks associated with stock

Difference between equity research and investment banking

Equity research sell-side is related to investment banking, though it often does not get the same amount of attention.

The research analysts relay information to the investment banks’ sales-forces and executives.

We will discuss additional differences between these two areas in the career section below. 

Roles in equity research

1. sell-side analysts.

The sell-side’s mission is to sell opportunities and/or assets , therefore, the analysts on the sell-side are usually investment bankers trained to study capital markets in the interest of providing investment recommendations to the buy-side (also known as institutional investors) or to the investment bank itself.

For example, the buy-side might use the research to decide whether to buy a specific stock or company.

The sell-side researchers must possess robust research skills and have the ability to produce valuation models and research reports.

Additionally, they must be experts in financial modeling and analysis as their work influences a company’s value and is made public.

Sell-side analysts will also spend time using a finance data room to complete due diligence with the buyer.

2. Buy-side analysts

The buy-side is comprised of asset managers, hedge funds, and institutional investors; its goal is to expand its opportunities, increase its assets, and raise capital .

With this in mind, buy-side equity researchers and analysts study and build financial research on companies.

More specifically, they examine and analyze companies to ensure that risks are limited and future investments stay true to their institution’s overall strategy and mission.

Consequently, it is critical that they track current news and trends in order to craft strong financial models.

Here we should note that buy-side equity research reports differ from sell-side equity research in that they are not for public consumption.

Finally, additional skills buy-side equity researchers should possess include the ability to analyze risks, the ability to produce high quality reports in a timely fashion, the ability to identify and track new business opportunities, and the ability to effectively communicate. 

The most famous equity research firms

The following are some top ranked equity research firms:

• Merrill Lynch Bank of America
• Morgan Stanley
• Wells Fargo Securities
• Guggenheim Securities
• Washington Analysis
• Zelman & Associates
• Wolfe Research
• Deutsche Bank
• Goldman, Sachs & Co
• BGC Partners 
• BMO Capital Markets Corp.
• Sberbank CIB

Things to consider when hiring an equity research firm

Here we must return to the notion of information being powerful and valuable.

Equity research can allow companies to gain capital and entice new buyers and/or investors.

Equity research firms can also help companies generate new ideas and identify potential red flags.

When you are looking to hire an equity research firm to address these needs or others, the following are top considerations:

• The background, training, and skills of the research analysts
• The quality of the firm’s research reports
• The analyst’s ability to understand the type of information that is relevant to you as the client

How to get into equity research

Equity research is an excellent entry point for people from a non-finance or economics background to enter the world of investments.

The ability to research, write well, and generate solid conclusions - arguably more the strengths of a good liberal arts major than an accounting graduate - are extremely important skills for the equity analyst.

A short course on valuations or corporate finance can allow them to quickly fill the gaps in quantitative areas where they’re lacking.

Whether you’re from a finance or economics background or not, the best way to get into equity research is by proving your ability.

Although the blue chip investment banks rarely if ever stray from the summer internship - junior analyst route, smaller investment firms will be happy to receive a well-written equity report which shows strong valuation and reasoning skills.

Use SeekingAlpha.com to see what some of the best equity research reports out there look like. And be better.

Tips here include:

• If you can find a stock that is highly undervalued or overvalued and your take on the stock goes against the grain, go for it. Investment firms will be more interested in something that changes their mindset than “Apple’s revenue is going to grow 10%, not 8%...”
• Use plenty of charts and tables that reinforce your argument. An article of 1,000-2,000 words should have at least five informative charts and tables. FYI - a stock chart of the company is not particularly informative for an equity research report, unless you’re using it to make an argument about how the stock has performed against its peers.
• Don’t be afraid to go more detailed than you think is required. Ultimately, your aim is to show the investment firm that you know financial metrics, how they work, and the story they’re telling about a company. But if you are adding it, it has to be correct (there’s a good chance SeekingAlpha’s editors won’t be long in telling you if they’re not!).

Repeat these steps and hone your equity research and valuation skills.

After two or three, you should already have something to send to senior research analysts at investment firms, and begin the conversation about how you can join their ranks.

Careers in equity research vs. investment banking

Careers in capital markets tend to fall into the two categories of investment banking and equity research.

Equity researchers must be strong research paper writers since they communicate critical information through reports, as well as skilled financial analysts.

The abilities to stay organized and work in a timely manner are also essential - in many regards, equity research can be seen as a highly structured career.

This does not mean, however, contrary to the stereotypes of analysts vs. investment bankers, that equity researchers and analysts do not need to possess strong social and oral communication skills.

In fact, the best equity research analysts meet with clients and help facilitate meetings; therefore, they must be able to communicate effectively both on paper and in person.

Oftentimes, on larger teams, the senior team members spend more time meeting with clients and companies, while the junior team members tend to spend more time working on financial models.

There is a general consensus in the industry that financial analysts tend to face lower levels of stress and work fewer hours than investment bankers.

On average, financial analysts are recorded as working 12 hour days , while investment bankers are usually reported as working 16 hour days .

For example, during due diligence , investment bankers may spend 50 plus hours a week solely inside the finance data room. 

‍ Read also

How to find the right data room for investment banking.

Of course, buy-side or sell-side equity research analysts do deal with stress, as one does in any job, but reports show the job is generally less stressful than the constant high stress endured by investment bankers.

Generally, the most stressful time for equity researchers is during earnings season.

Additionally, M&A deals will certainly create longer hours and higher stress for these individuals. 

To pursue a career as a research analyst, one must have at least a bachelor’s degree, although MBAs are often preferred.

To truly progress in this career, one should earn the Chartered Financial Analyst certification (CFA), which requires at least three years experience in the field. 

Difference between equity research and private equity

Another two industries that often get confused is equity research and private equity . ‍

The difference is that equity research consists of finding the valuation of the listed companies on stock exchanges, while private equity is researching and analysing the private companies and interpreting the results.

An equity research analyst would speak with firm’s traders and brokers for discussing and sharing investment recommendations for clients.

Where as a private equity analyst uses financial modeling techniques and a private equity software and CRM to research and analyse private companies.

Just like with banking, private equity analysts also use a private equity due diligence checklist template to work with their clients and collect information during diligence.

While equity research produces valuable information, we would be remiss not to acknowledge that the industry has faced some criticism in recent years, which has led to reports of a decline in industry practitioners.

‍ However there are some sources that predict the number of jobs in this career will actually increase faster than other careers in the next few years.

Whatever the number of practicing equity researchers, it is important to note that one should not rely solely on equity reports when making major decisions as analysts can both make mistakes and exaggerate or compose information in ways that benefit their customers and/or the market.

For instance, the sell-side might work to frame its subject in a favorable light to potential buyers.

While one should be aware of these trends and potential red flags, equity research is still a substantial part of our business world, specifically M&A. 

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• Research in Bull & Bear Markets

How Equity Research Is Changing

• Who Pays for Research?
• The Role of Fee-Based Research

The Bottom Line

The changing role of equity research.

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

The role of equity research is to provide information to the market. A lack of information creates inefficiencies that result in stocks being misrepresented (whether over or undervalued). Analysts use their expertise and spend a lot of time analyzing a stock, its industry, and its peer group to provide earnings and valuation estimates. Research is valuable because it fills information gaps so that each individual investor does not need to analyze every stock. This division of labor makes the market more efficient.

The title of this article is perhaps a bit misleading, because the role of equity research really hasn't changed since the first U.S. stock trade occurred under the buttonwood tree on Manhattan Island. What has changed is the economic and trading environments (e.g. the character of bull and bear markets) that influence research.

Key Takeaways

• Equity research is a key piece of Wall Street analysis, used by investors large and small to make better-informed investment decisions in the stock market.
• Often research is funded by institutional investors on a fee-basis or using soft dollars.
• Depending on whether the market is in a bull or bear mode, equity research has begun to shift its lens of analysis and the types of reports issued.

Research in Bull and Bear Markets

In every bull market, some excesses become apparent only in the bear market that follows. Whether it is dotcoms or organic foods, each age has its mania that distorts the normal functioning of the market. In a rush to make money, rationality is the first casualty. Investors rush to jump on the bandwagon and the market over-allocates capital to the "hot" sector(s). This herd mentality is the reason why bull markets have funded so many "me-too" ideas throughout history.

Research is a function of the market and is influenced by these swings. In a bull market, investment bankers , the media and investors pressure analysts to focus on the hot sectors. Some analysts morph into promoters as they ride the market. Those analysts that remain, rational practitioners, are ignored, and their research reports go unread.

Seeking to blame someone for investment losses is a normal event in bear markets. It happened in the 1930s, 1970s, during the dot com crash and the financial crisis of 2008, too. Some of the criticisms are deserved, but generally, the need to provide information about companies has not changed.

To discuss the role of research in today's market , we need to differentiate between Wall Street research and other research. The major brokerages provide Wall Street research—typically sell-side firms—both on and off Wall Street. Other research is produced by independent research firms and small boutique brokerage firms.

This differentiation is important. First, Wall Street research has become focused on large-cap , very liquid stocks, and ignores the majority of publicly traded stocks. To remain profitable, Wall Street firms have focused on big-cap stocks to generate highly lucrative investment banking deals and trade profits, but also face the daunting task of cutting costs.

Those companies that are likely to provide the research firms with sizable investment banking deals are the stocks that are determined worthy of being followed by the market. The stock's long-term investment potential is often secondary.

Other research is filling the information gap created by Wall Street. Independent research firms and boutique brokerage firms are providing research on the stocks that have been orphaned by Wall Street. This means that independent research firms are becoming a primary source of information on the majority of stocks, but investors are reluctant to pay for research because they don't know what they are paying for until well after the purchase. Unfortunately, not all research is worth buying, as the information can be inaccurate and misleading.

These days there is a great deal of research that is provided for free to clients via email. Even at essentially zero cost to the investor, a large majority of the research goes unread.

Who Pays for Research? Big Investors Do!

The ironic thing is that while research has proven to be valuable, individual investors do not seem to want to pay for it. This may be because, under the traditional system, brokerage houses provided research to gain and keep clients. Investors just had to ask their brokers for a report and received it at no charge. What seems to have gone unnoticed is that the investor commissions paid for that research.

A good indicator of the value of research is the amount institutional investors are willing to pay for it. Institutional investors typically hire their own analysts to gain a competitive edge over other investors. Although spending on equity research analysts has significantly declined in recent years, institutions may also pay for the sell-side research they receive (either with dollars or by giving the supplying brokerage firm trades to execute).

European regulations that went into effect in 2018, known as  MiFID II , require asset managers to fund external research from their own profit and loss account (P&L) or through research payments that are tracked with clear audit trails. This will lead to billing clients for research and trading separately.

The Role of Fee-Based Research

Fee-based research increases market efficiency and bridges the gap between investors who want research (without paying) and companies who realize that Wall Street is not likely to provide research on their stock. This research provides information to the widest possible audience at no charge to the reader because the subject company has funded the research.

It is important to differentiate between objective fee-based research and research that is promotional. Objective fee-based research is similar to the role of your doctor. You pay a doctor not to tell you that you feel good, but to give you their professional and truthful opinion of your condition.

Legitimate fee-based research is a professional and objective analysis and opinion of a company's investment potential. Promotional research is short on analysis and full of hype. One example of this is the email reports and misleading social media posts about the penny stocks that will supposedly triple in a short time.

Legitimate fee-based research firms have the following characteristics:

• They provide analytical, not promotional services.
• They are paid a set annual fee in cash; they do not accept any form of equity, which may cause conflicts of interest .
• They provide full and clear disclosure of the relationship between the company and the research firm so investors can evaluate objectivity.

Companies that engage a legitimate fee-based research firm to analyze their stock are trying to get information to investors and improve market efficiency.

Such a company is making the following important statements:

• It believes its shares are undervalued because investors are not aware of the company.
• It is aware that Wall Street is no longer an option.
• It believes that its investment potential can withstand objective analysis.

The National Investor Relations Institute (NIRI) was probably the first group to recognize the need for fee-based research. In January 2020, NIRI issued a letter emphasizing the need for small-cap companies to find alternatives to Wall Street research to get their information to investors.

The reputation and credibility of a company and research firm depends on the efforts they make to inform investors. A company does not want to be tarnished by being associated with unreliable or misleading research. Similarly, a research firm will only want to analyze companies that have strong fundamentals and long-term investment potential. Fee-based research continues to provide a professional and objective analysis of a company's investment potential, although the market for its services remains challenged in the current business environment.

CFA Institute. " MiFID II Equity Research Costs Survey ."

National Investor Relations Institute (NIRI). " NIRI Proposes Guidance on Company-sponsored Research ."

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How to Write an Equity Research Report

By Brian Dzingai |

 Reviewed By Rebecca Baldridge |

November 15, 2022

What is an Equity Research Report?

An equity research report may focus on a specific stock or industry sector, currency, commodity, or fixed-income instrument, or even on a 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
• It provides an overview of the business, the industry it operates in, the management team, the company’s financial performance, and 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. 

Basic Information

The research report should begin with basic information about the firm, including the company’s ticker symbol, the primary exchange where its 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. 

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 itself 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.” 

Investment Summary

This section should include a brief description of the company, significant recent developments, an earnings forecast, a 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? 

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. 

Financial Analysis

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 results 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 especially 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

This section should 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 hard 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)

This section should include 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 online 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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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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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

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• Equity Research Buy-Side
• Equity Research Firms
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• 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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ESG | The Report

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 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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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.

Related Resource: Portfolio Management: What it is and How Visible Can Help

Related Resource: How To Write the Perfect Investor Update (Tips and Templates)

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.

Equity research: How to analyze and report on your equity

1. introduction to equity research, 2. understanding financial statements, 3. valuation techniques, 4. industry and company analysis, 5. risk assessment and management, 6. financial modeling and forecasting, 7. investment recommendations, 8. writing equity research reports, 9. conclusion and key takeaways.

1. What Is Equity Research?

- Definition : Equity research involves analyzing publicly traded companies to provide insights on their financial health , growth prospects, and valuation. It's like dissecting a complex organism to understand its vital signs.

- Purpose : Investors, fund managers, and financial institutions rely on equity research to make informed decisions . It helps them identify investment opportunities , assess risks, and allocate capital effectively.

- Methods : Equity researchers use a mix of quantitative (financial modeling, ratios) and qualitative (industry trends, management quality) approaches.

- Example : Imagine you're researching a tech company. You'd analyze its revenue growth, profit margins, competitive landscape, and management team. If the company develops cutting-edge AI software , you'd explore its patents and partnerships.

2. Types of Equity Research Reports :

- Buy-Side Research : Conducted by asset managers, hedge funds, and individual investors. They seek investment opportunities. A "Buy" recommendation suggests the stock is undervalued.

- Sell-Side Research : Produced by brokerage firms. They serve clients (institutional investors, retail traders). A "Sell" recommendation indicates overvaluation.

- Industry Reports : Cover broader sectors (e.g., healthcare, energy). These highlight trends, challenges, and growth prospects.

- Company-Specific Reports : Focus on individual companies. They assess financials, competitive advantages, and risks.

3. Components of an equity Research report :

- Executive Summary : Concise overview of findings and recommendations.

- Company Overview : Background, industry, and key products/services.

- Financial Analysis : Income statement, balance sheet, cash flow statement . Ratios like P/E, P/B, and ROE.

- Valuation : DCF (Discounted Cash Flow), comparable company analysis (comps), and precedent transactions.

- Investment Thesis : Why should someone buy/sell/hold the stock?

- Risks and Challenges : Regulatory changes, competition, economic downturns.

- Example : In your report on XYZ Corp., you'd discuss its revenue growth (financial analysis), estimate its intrinsic value (valuation), and highlight risks (e.g., supply chain disruptions).

4. challenges in Equity research :

- Information Asymmetry : Analysts often have less data than company insiders.

- Bias : Confirmation bias (favoring existing views) can cloud judgment.

- Market Sentiment : Emotional swings impact stock prices .

- Example : During a market bubble, analysts may overlook risks due to euphoria.

5. Ethical Considerations :

- Independence : Analysts must avoid conflicts of interest (e.g., not favoring companies that their firm has investment banking ties with).

- Transparency : Disclose any personal holdings or affiliations.

- Example : An ethical analyst would disclose if they own shares in a company they're researching.

Remember, equity research isn't just about numbers; it's about understanding businesses, industries, and the broader economic landscape. So, whether you're a curious investor or a future analyst, keep exploring, questioning, and learning!

Introduction to Equity Research - Equity research: How to analyze and report on your equity

1. The Big Picture:

- financial statements are like a company's financial report card. They summarize its financial performance, position, and cash flows over a specific period.

- The three primary financial statements are:

- Income Statement (Profit and Loss Statement): Reveals a company's revenues, expenses, and net income (or loss) during a given period.

- Balance Sheet (Statement of Financial Position): Presents a snapshot of a company's assets, liabilities, and equity at a specific point in time.

- Cash Flow Statement: Tracks the inflows and outflows of cash , helping us understand liquidity and operational efficiency .

2. Income Statement Insights:

- Imagine the income statement as a movie—it captures a company's financial performance over time .

- Revenue (Sales): The top line. It represents the total money earned from selling goods or services .

- Cost of Goods Sold (COGS): The direct costs associated with producing goods or services .

- Gross Profit: Revenue minus COGS. It shows how efficiently a company produces its goods.

- Operating Expenses: Includes selling, general, and administrative expenses. Think of it as the cost of running the business.

- Net Income: The bottom line. It's what's left after all expenses. Positive net income is good; negative, not so much.

3. Balance Sheet Nuggets:

- The balance sheet is like a snapshot taken at a specific moment.

- Current Assets: Cash, accounts receivable, inventory, etc.

- Non-Current Assets: Property, plant, equipment, intangibles.

- Liabilities:

- Current Liabilities: short-term obligations like accounts payable, short-term debt .

- long-Term liabilities : long-term debt , deferred tax liabilities .

- Common Stock: Represents ownership.

- Retained Earnings: Accumulated profits.

- Total Equity: Assets minus liabilities. Also known as shareholders' equity.

4. Cash Flow Clues:

- The cash flow statement reveals how cash moves in and out of a company.

- Operating Activities: Cash from day-to-day operations (e.g., sales, expenses).

- Investing Activities: Cash related to investments (e.g., buying/selling assets).

- Financing Activities: Cash from raising capital (e.g., issuing stock, taking loans).

- Example: If a company has positive operating cash flow but negative investing cash flow (buying expensive machinery), it might be investing for growth.

5. Putting It All Together:

- Imagine analyzing a company like solving a puzzle. Each financial statement provides a piece.

- Ratio Analysis: Use financial ratios (e.g., P/E ratio , ROE , current ratio ) to assess performance.

- Comparisons: Compare a company's statements with industry peers or historical data.

- Footnotes: Don't ignore them! They provide additional context and explanations.

Remember, financial statements are like a language—once you learn to read them, you unlock a wealth of information. So, next time you encounter a balance sheet, think of it as a treasure map leading you to hidden insights about a company's financial journey!

Understanding Financial Statements - Equity research: How to analyze and report on your equity

Now, let's explore some of the key valuation techniques from different perspectives:

1. Discounted Cash Flow (DCF) Analysis :

- Perspective : Fundamental Analysis

- Insight : DCF is widely used because it considers the time value of money. It estimates the present value of a company's future cash flows by discounting them back to today's dollars.

- Example : Suppose we're valuing a tech startup. We project its cash flows for the next ten years, apply an appropriate discount rate (usually the weighted average cost of capital), and sum up the present values.

2. Comparable Company Analysis (Comps) :

- Perspective : Market-Based Approach

- Insight : Comps compare the target company's financial metrics (such as P/E ratio, EV/EBITDA, etc.) with those of similar publicly traded companies.

- Example : If we're analyzing a retail company, we'd look at other retail companies' valuation multiples (e.g., P/E ratios) and apply them to our target's earnings.

3. precedent Transactions analysis :

- Insight : Precedent transactions involve analyzing historical M&A deals in the same industry. It helps us understand what buyers are willing to pay for similar businesses.

- Example : If a pharmaceutical company is acquiring another, we'd study past pharma acquisitions to gauge the appropriate valuation.

4. asset-Based valuation :

- Perspective : Balance Sheet Approach

- Insight : Asset-based valuation focuses on a company's net assets (book value). It includes both tangible assets (like property, plant, and equipment) and intangible assets (like patents or brand value).

- Example : valuing a real estate company involves assessing its property holdings, land, and buildings.

5. Earnings Multiples :

- Insight : Earnings multiples (e.g., P/E, PEG) compare a company's earnings to its stock price . They reflect market sentiment and growth expectations.

- Example : A high P/E ratio suggests investors expect strong future growth, while a low P/E may indicate undervaluation.

6. Replacement Cost Valuation :

- Perspective : Cost Approach

- Insight : This method estimates the cost of replacing a company's assets. It's useful for industries where asset values matter significantly.

- Example : In the airline industry, we'd assess the cost of replacing an airline's fleet of planes.

Remember, no single valuation technique is perfect. Analysts often use a combination of methods to triangulate a more accurate valuation. Additionally, context matters—different industries and growth stages require tailored approaches. As you embark on your equity research journey, keep honing your valuation skills and adapt them to the specific companies you analyze.

Valuation Techniques - Equity research: How to analyze and report on your equity

1. Industry Analysis :

- Macro View : Begin by zooming out. Consider the broader economic landscape and how it impacts different industries. Factors like GDP growth, inflation rates, interest rates, and government policies play a pivotal role. For instance, during an economic downturn, cyclical industries (e.g., automotive, construction) may suffer, while defensive sectors (e.g., healthcare, utilities) tend to remain resilient.

- Porter's Five Forces : Michael Porter's framework helps assess industry attractiveness. These forces include:

- Threat of New Entrants : High barriers (e.g., capital requirements, patents) protect established players.

- Bargaining Power of Suppliers and Buyers : Strong supplier or buyer power affects profitability.

- Threat of Substitutes : Industries with unique products face lower substitution risk.

- Rivalry Among Existing Competitors : Intense competition erodes profits.

- Competitive Landscape : Analyze market share, concentration, and competitive advantages. For example, the smartphone industry features fierce rivalry among Apple, Samsung, and other players.

- Lifecycle Stages : Industries evolve through growth, maturity, and decline phases. Consider where an industry stands. For instance:

- Growth : Technology companies during the dot-com boom.

- Maturity : Automobile manufacturing.

- Decline : Traditional print media.

- Trends and Disruptions : Identify technological shifts, regulatory changes, and consumer preferences. Electric vehicles disrupting the automotive industry or cloud computing transforming IT services are prime examples.

2. Company Analysis :

- Financial Statements : Dive into a company's financials—balance sheet, income statement, and cash flow statement. Ratios like P/E ratio , ROE , and debt-to-equity reveal financial health.

- SWOT Analysis :

- Strengths : What sets the company apart? Apple's brand loyalty and ecosystem.

- Weaknesses : Areas needing improvement (e.g., operational inefficiencies).

- Opportunities : External factors (e.g., expanding into emerging markets).

- Threats : Risks (e.g., regulatory changes, competition).

- Competitive Advantage : Understand what gives the company an edge. Amazon's logistics network or Coca-Cola's brand recognition.

- Management Quality : Evaluate leadership, corporate governance, and alignment with shareholders.

- Valuation Models : Use discounted cash flow (DCF), comparable company analysis (comps), or precedent transactions to estimate intrinsic value.

- Qualitative Factors : Consider intangibles like corporate culture, innovation, and social responsibility.

3. Examples :

- Tesla : An industry disruptor in electric vehicles, with visionary leadership (Elon Musk) and a cult-like following.

- Netflix : Revolutionized the entertainment industry by shifting from DVDs to streaming, leveraging data analytics .

- Alphabet (Google) : Dominant in online advertising due to its search engine and ecosystem (Android, YouTube).

Remember, thorough analysis requires a blend of quantitative and qualitative insights. As you embark on your equity research journey, keep honing your skills and staying curious!

Industry and Company Analysis - Equity research: How to analyze and report on your equity

### Understanding Risk: A Multifaceted Perspective

risk in equity research is akin to navigating a complex maze. It manifests in various forms, each demanding careful consideration. Here are some key insights from different viewpoints:

1. Investor's Perspective:

- Investors face a spectrum of risks, including market risk, credit risk, liquidity risk, and operational risk.

- Market Risk : Fluctuations in stock prices due to macroeconomic factors, geopolitical events, or industry-specific trends .

- credit risk : The risk of a company defaulting on its debt obligations.

- Liquidity Risk : The possibility of not being able to buy or sell an asset without significantly impacting its price.

- Operational Risk : Risks arising from internal processes, fraud, or system failures.

2. Company-Specific Risks:

- Every company operates in a unique environment, facing distinct risks.

- Industry Risk : Industry-specific challenges such as regulatory changes, technological disruptions, or supply chain issues .

- Business Risk : Risks related to a company's operations, competitive landscape, and strategic decisions.

- Financial Risk : Concerns about a firm's financial health, debt levels, and profitability.

3. Quantitative vs. Qualitative Assessment:

- Quantitative Methods : These involve statistical models, historical data, and financial ratios. Examples include beta (a measure of market risk) and Value at Risk (VaR).

- Qualitative Methods : These consider non-numeric factors like management quality, corporate governance, and brand reputation.

### strategies for Risk mitigation

Now, let's explore practical approaches to manage risk:

1. Diversification :

- Spread your investments across different asset classes (stocks, bonds, real estate) and sectors.

- Example: If you hold tech stocks, consider adding exposure to healthcare or utilities.

2. risk-Adjusted return Metrics :

- Evaluate investments based on risk-adjusted metrics like the sharpe ratio or Sortino ratio.

- These ratios consider both returns and volatility, providing a more holistic view.

3. Hedging Techniques :

- Options : Use options to protect against adverse price movements . For instance, buying put options can act as insurance.

- Futures Contracts : Hedge against commodity price fluctuations using futures contracts.

4. Scenario Analysis :

- Imagine various scenarios (bull, bear, and base case) and assess how your portfolio performs.

- Adjust your holdings accordingly.

5. Stress Testing :

- Simulate extreme events (e.g., a market crash or a sudden interest rate hike) to gauge portfolio resilience.

- Identify vulnerabilities and take preventive measures.

### Examples to Illustrate Concepts

1. Tesla (TSLA) :

- Risk : High market volatility due to Elon Musk's tweets, regulatory scrutiny, and production challenges.

- Mitigation : Diversify by holding other tech or renewable energy stocks alongside TSLA.

2. Pharmaceutical Industry :

- Risk : Clinical trial failures, patent expirations, and regulatory hurdles.

- Mitigation : Invest in a basket of pharma companies rather than relying solely on one stock.

Remember, risk is inherent in investing, but informed decisions and prudent risk management can enhance your chances of success.

*(Note: The examples provided are for illustrative purposes only. Always conduct thorough research before making investment decisions .

Risk Assessment and Management - Equity research: How to analyze and report on your equity

financial modeling and forecasting play a crucial role in equity research and analysis. By utilizing various techniques and tools, analysts can gain valuable insights into the financial performance and future prospects of a company. In this section, we will delve into the intricacies of financial modeling and forecasting, exploring different perspectives and providing in-depth information.

1. Understanding Financial Modeling:

Financial modeling involves creating mathematical representations of a company's financial statements and operations. It allows analysts to simulate different scenarios and assess the impact on key financial metrics. By incorporating historical data, industry trends, and assumptions, analysts can develop models that provide a comprehensive view of a company's financial health.

2. Forecasting Techniques:

Forecasting is an essential aspect of financial modeling, enabling analysts to predict future outcomes based on historical data and market trends. Here are some commonly used forecasting techniques:

A. time Series analysis : This technique analyzes historical data to identify patterns and trends. It helps in forecasting future values based on past performance.

B. Regression Analysis: regression models establish relationships between dependent and independent variables. Analysts can use regression to predict financial metrics based on relevant factors.

C. monte Carlo simulation : This technique involves running multiple simulations using random variables to assess the range of possible outcomes. It helps in understanding the uncertainty associated with forecasts.

3. key Components of financial Models:

Financial models consist of various components that capture different aspects of a company's operations. These components may include:

A. income statement : The income statement projects a company's revenue, expenses, and profitability over a specific period. It helps in assessing the company's ability to generate profits.

B. balance sheet : The balance sheet provides a snapshot of a company's assets, liabilities, and shareholders' equity at a given point in time. It helps in evaluating the company's financial position.

C. cash flow Statement: The cash flow statement tracks the inflows and outflows of cash within a company. It helps in understanding the company's liquidity and cash management.

4. Sensitivity Analysis:

Sensitivity analysis is a technique used to assess the impact of changes in key variables on the financial model's output. By adjusting assumptions and observing the corresponding changes in the forecasted values, analysts can identify the factors that have the most significant influence on the model's results.

5. Importance of Accuracy and Assumptions:

Financial modeling and forecasting heavily rely on accurate data and reasonable assumptions. Analysts must ensure that the data used in the models is reliable and up-to-date. Additionally, assumptions should be carefully considered and based on sound judgment to ensure the accuracy and relevance of the forecasts.

Financial modeling and forecasting are essential tools in equity research. They enable analysts to gain insights into a company's financial performance and make informed investment decisions . By utilizing various techniques and components, analysts can create robust models that provide valuable information for investors and stakeholders.

Financial Modeling and Forecasting - Equity research: How to analyze and report on your equity

Investment Recommendations

Investment recommendations serve as a compass for investors navigating the complex financial landscape. Whether you're a seasoned investor or a novice, understanding these recommendations is crucial for making informed decisions . Let's break it down:

1. fundamental Analysis perspective :

- earnings Growth potential : Analysts often recommend stocks based on their projected earnings growth. Companies with robust revenue streams, expanding profit margins , and innovative business models tend to attract positive recommendations.

Example:* Consider a technology company that consistently increases its earnings per share (EPS) due to strong demand for its products. Analysts may recommend buying its stock.

- Valuation Metrics: price-to-earnings ratio (P/E), price-to-book ratio (P/B), and other valuation metrics play a significant role. A stock trading at a discount to its intrinsic value might receive a "buy" recommendation.

Example:* If a well-established utility company has a low P/E ratio compared to its historical average, it could be an attractive investment.

- Dividend Yield: Income-seeking investors focus on dividend-paying stocks . Recommendations often highlight companies with stable dividends and a history of consistent payouts.

Example:* A utility company with a reliable dividend track record might be recommended for income-oriented portfolios.

2. technical Analysis perspective :

- Chart Patterns and Trends: Technical analysts study price charts to identify patterns and trends . Stocks breaking out of bullish patterns (e.g., ascending triangles, cup and handle) may receive "buy" recommendations.

Example:* If a stock's price breaks above a long-term resistance level, it signals potential upside.

- Moving Averages: The 50-day and 200-day moving averages help gauge a stock's momentum. Crossovers (e.g., when the 50-day crosses above the 200-day) can influence recommendations.

Example:* A golden cross (50-day moving average rising above the 200-day) might prompt a positive recommendation.

- relative Strength index (RSI): overbought or oversold conditions impact recommendations. An RSI above 70 suggests overbought, while below 30 indicates oversold.

Example:* If a stock's RSI is extremely low, it might be due for a rebound.

3. risk-Adjusted perspective :

- Risk Tolerance: Recommendations align with an investor's risk tolerance . Aggressive investors may seek high-growth stocks , while conservative investors prefer stability.

Example:* A young investor with a long time horizon might receive recommendations for growth-oriented stocks.

- Diversification: Recommendations emphasize diversifying across asset classes (stocks, bonds, real estate) to manage risk.

Example:* An analyst might recommend adding international stocks to balance a domestic-heavy portfolio.

4. sector-Specific insights :

- Cyclical vs. Defensive Sectors: Recommendations vary based on economic cycles. Cyclical sectors (e.g., consumer discretionary, industrials) perform differently from defensive sectors (e.g., utilities, healthcare).

Example:* During an economic recovery, cyclical stocks may be favored.

- Industry Trends: Recommendations consider industry-specific dynamics. Emerging technologies, regulatory changes, and global events impact sectors differently.

Example:* Renewable energy stocks gained traction due to increased environmental awareness.

5. Behavioral Finance Considerations:

- Herding Behavior: Investors often follow consensus recommendations. Analysts' consensus can influence market sentiment .

Example:* If multiple analysts recommend a stock, it may attract more buyers.

- Confirmation Bias: Investors seek recommendations that align with their existing beliefs. Analysts' opinions can reinforce biases.

Example:* A value investor may gravitate toward stocks with low P/E ratios.

Remember, investment recommendations are not guarantees. Conduct thorough research, understand your own financial goals, and consult with a financial advisor before acting on any recommendation.

Investment Recommendations - Equity research: How to analyze and report on your equity

1. Purpose and Audience :

- Equity research reports serve multiple purposes. They inform investors, fund managers, and other stakeholders about investment opportunities, risks, and potential returns.

- Analysts must tailor their reports to different audiences. Institutional investors may seek detailed financial analysis, while retail investors prefer concise summaries.

2. Structuring the Report :

- Executive Summary : Begin with a succinct overview of the company, its industry, and investment thesis. highlight key points .

- Company Overview : Provide background information, including industry context, company history, and major products/services.

- Financial Analysis : Dive into financial statements (income statement, balance sheet, cash flow statement). Discuss revenue growth, profitability, liquidity, and solvency.

- Valuation Methods : Explain how you arrived at the company's intrinsic value. Common methods include discounted cash flow (DCF), comparable company analysis (comps), and precedent transactions.

- Investment Risks : Identify risks specific to the company, industry, or broader market. Examples: regulatory changes, competitive pressures, economic downturns.

- Investment Thesis : State your recommendation (buy, hold, sell) and rationale. Back it up with data and qualitative insights.

3. Qualitative Analysis :

- Industry Analysis : Understand industry dynamics, trends, and competitive landscape. Consider Porter's Five Forces model.

- Company Strategy : Evaluate management's vision, growth plans, and execution track record.

- SWOT Analysis : Assess strengths, weaknesses, opportunities, and threats.

- Corporate Governance : Investigate board composition, executive compensation, and shareholder rights.

4. Quantitative Analysis :

- Financial Ratios : Calculate and interpret ratios like price-to-earnings (P/E), price-to-book (P/B), and return on equity (ROE).

- DCF Valuation : forecast future cash flows , discount them to present value, and arrive at an intrinsic value.

- Comps Analysis : Compare the company's valuation multiples to peers in the same industry.

- Scenario Analysis : Explore best-case, base-case, and worst-case scenarios .

5. Examples :

- Suppose you're analyzing a tech company, XYZ Inc.:

- Executive Summary : XYZ is a leading cloud services provider with robust revenue growth driven by enterprise adoption.

- Valuation : DCF model estimates an intrinsic value of $150 per share.

- Risks : Regulatory scrutiny on data privacy and intense competition from amazon Web services .

- Investment Thesis : Buy XYZ due to its strong market position and recurring revenue model .

6. Writing Style and Clarity :

- Use clear language, avoid jargon, and maintain a professional tone.

- Support your arguments with data, charts, and graphs.

- Proofread meticulously; errors undermine credibility.

Remember, equity research reports are not static—they evolve as new information emerges. Continuously update your analysis to stay ahead in the dynamic world of finance!

Writing Equity Research Reports - Equity research: How to analyze and report on your equity

In the realm of equity research, the journey from data gathering to insightful analysis is akin to navigating a labyrinth. As we near the end of our exploration, it's essential to consolidate our findings, distill the essence, and extract actionable insights. This section serves as the compass that guides us toward the treasure trove of conclusions and key takeaways.

## 1. Holistic Perspectives: A Kaleidoscope of Insights

- Fundamental Analyst's Lens:

- Earnings Per Share (EPS): The bedrock of valuation, EPS encapsulates a company's profitability. However, beware of short-term fluctuations; focus on long-term trends.

- P/E Ratios: The price-to-earnings ratio reveals market sentiment. High P/E may indicate growth expectations, but it could also signal overvaluation.

- Balance Sheet Scrutiny: Assets, liabilities, and equity dance in harmony. Analyze debt levels, liquidity, and working capital.

- cash Flow dynamics : Cash is king. Operating, investing, and financing activities provide a holistic picture.

- Industry Comparisons: Benchmark against peers. Is your company the tortoise or the hare?

- Technical Analyst's Prism:

- Moving Averages: The rhythmic heartbeat of stock prices. Spot trends, crossovers, and golden/death crosses.

- Support and Resistance: Like invisible walls, these levels guide price movements . Breakouts and breakdowns await discovery.

- Candlestick Patterns: The language of bulls and bears. Engulfing, hammer, shooting star—each tells a tale.

- Relative Strength Index (RSI): Oscillations reveal overbought or oversold conditions. Timing matters.

- Chart Patterns: Triangles, head and shoulders, cup and handle—decode the visual symphony.

- Behavioral Economist's Kaleidoscope:

- Herding Instinct: Humans mimic the crowd. Understand market psychology—fear, greed, and FOMO.

- Confirmation Bias: Seek evidence that aligns with your thesis. Challenge it; seek disconfirming data.

- Anchoring: Beware of fixed reference points. Don't cling to outdated beliefs.

- Loss Aversion: Losses hurt more than gains please. Mitigate emotional biases.

- Narrative Fallacy: We love stories. Separate narratives from hard data.

## 2. The Art of Synthesis: Numbers, Narratives, and Nuances

- Quantitative Insights:

- Regression Models: Linear, polynomial, or exponential—fit the data. Predictive power lies within.

- DCF Valuation: Discounted Cash Flow—the oracle of intrinsic value. But assumptions matter.

- monte Carlo simulations : Embrace randomness. Simulate thousands of scenarios.

- Risk Metrics: Beta, standard deviation, Value at Risk (VaR)—quantify uncertainty.

- Qualitative Wisdom:

- Management Interviews: Decode their body language. Are they stewards or swindlers?

- Competitive Landscape: Prowl the jungle. Who's the lion, who's the gazelle?

- Regulatory Environment: SEC filings, legal battles, policy changes—read between the lines.

- Macro Trends: Demographics, geopolitics, climate change—macro whispers shape micro realities.

## 3. The Oracle's Scrolls: Lessons from History

- Dot-Com Bubble (1999-2000): Greed soared, logic plummeted. Pets.com and Webvan vanished. Learn from irrational exuberance.

- Financial Crisis (2008): Subprime mortgages ignited a global inferno. Risk management matters.

- COVID-19 Pandemic (2020): Zoom boomed, airlines nosedived. Adaptability is survival.

## 4. The Odyssey Continues: Stay Curious, Stay Vigilant

Equity research is a perpetual odyssey. As you pen your reports, remember:

- Diversify Sources: Don't rely solely on annual reports. Explore industry journals, expert opinions, and alternative data.

- Scenario Analysis: The future is a chameleon. Paint scenarios—optimistic, pessimistic, and realistic.

- Feedback Loop: Learn from your hits and misses. Iterate, refine, and evolve.

- Ethical Compass: Integrity is your North Star. Avoid conflicts of interest.

In this labyrinth of numbers, narratives, and human behavior, we emerge not as mere analysts but as storytellers—interpreting the past, deciphering the present, and envisioning the future.

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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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Key Data on Health and Health Care by Race and Ethnicity

Nambi Ndugga , Latoya Hill , and Samantha Artiga Published: June 11, 2024

Executive Summary

Introduction.

Racial and ethnic disparities in health and health care remain a persistent challenge in the United States. The COVID-19 pandemic’s uneven impact on people of color drew increased attention to inequities in health and health care, which have been documented for decades and reflect longstanding structural and systemic inequities rooted in historical and ongoing racism and discrimination. KFF’s 2023 Survey on Racism, Discrimination, and Health documents ongoing experiences with racism and discrimination, including in health care settings. While inequities in access to and use of health care contribute to disparities in health, inequities across broader social and economic factors that drive health, often referred to as social determinants of health , also play a major role. Using data to identify disparities and the factors that drive them is important for developing interventions and directing resources to address them, as well as for assessing progress toward achieving greater equity over time.

This analysis examines how people of color fare compared to White people across 64 measures of health, health care, and social determinants of health using the most recent data available from federal surveys and administrative sets as well as the 2023 KFF Survey on Racism, Discrimination, and Health , which provides unique nationally-representative measures of adults’ experiences with racism and discrimination, including in health care (see About the Data). Where possible, we present data for six groups: White, Asian, Hispanic, Black, American Indian or Alaska Native (AIAN), and Native Hawaiian or Pacific Islander (NHPI). People of Hispanic origin may be of any race, but we classify them as Hispanic for this analysis. We limit other groups to people who identify as non-Hispanic. When the same or similar measures are available in multiple datasets, we use the data that allow us to disaggregate for the largest number of racial and ethnic groups. Future analyses will reflect new federal standards that will utilize a combined race and ethnicity approach for collecting information and include a new category for people who identify as Middle Eastern or North African. Unless otherwise noted, differences described in the text are statistically significant at the p<0.05 level.

We include data for smaller population groups wherever available. Instances in which the unweighted sample size for a subgroup is less than 50 or the relative standard error is greater than 30% — which are outside of what we would typically include in analysis like this — are noted in the figures, and confidence intervals for those measures are included in the figure. Although these small sample sizes may impact the reliability, validity, and reproducibility of data, they are important to include because they point to potential underlying disparities that are hidden without disaggregated data. For some data measures throughout this brief we refer to “women” but recognize that other individuals also give birth, including some transgender men, nonbinary, and gender-nonconforming persons.

Key Takeaways

Black, Hispanic, and AIAN people fare worse than White people across the majority of examined measures of health and health care and social determinants of health (Figure 1). Black people fare better than White people for some cancer screening and incidence measures, although they have higher rates of cancer mortality. Despite worse measures of health coverage and access and social determinants of health, Hispanic people fare better than White people for some health measures, including life expectancy, some chronic diseases, and most measures of cancer incidence and mortality. These findings may, in part, reflect variation in outcomes among subgroups of Hispanic people , with better outcomes for some groups, particularly recent immigrants to the U.S. Examples of some key findings include:

• Nonelderly AIAN (19%) and Hispanic (18%) people were more than twice as likely as their White counterparts (7%) to be uninsured as of 2022.
• Among adults with any mental illness, Hispanic (40%), Black (38%), and Asian (36%) adults were less likely than White adults (56%) to receive mental health services as of 2022.
• Roughly, six in ten Hispanic (63%), AIAN (63%), and Black (58%) adults went without a flu vaccine in the 2022-2023 season, compared to less than half of White adults (49%).
• AIAN (67.9 years) and Black (72.8 years) people had a shorter life expectancy compared to White people (77.5 years) as of 2022, and AIAN, Hispanic, and Black people experienced larger declines in life expectancy than White people between 2019 and 2022; however, all racial and ethnic groups experienced a small increase in life expectancy between 2021 and 2022.
• Black (10.9 per 1,000) and AIAN (9.1 per 1,000) infants were at least two times as likely to die as White infants (4.5 per 1,000) as of 2022. Black and AIAN women also had the highest rates of pregnancy-related mortality.
• AIAN (24%) and Black (21%) children were more than three times as likely to have food insecurity as White children (6%), and Hispanic children (15%) were over twice as likely to have food insecurity than White children (6%) as of 2022.

Asian people in the aggregate fare the same or better compared to White people for most examined measures. However, they fare worse for some measures, including receipt of some routine care and screening services, and some social determinants of health, including home ownership, crowded housing, and experiences with racism. They also have higher shares of people who are noncitizens or who have limited English proficiency (LEP), which could contribute to barriers to accessing health coverage and care. Moreover, the aggregate data may mask underlying disparities among subgroups of the Asian population. Asian people also report experiences with discrimination in daily life, which is associated with adverse effects on mental health and well-being.

Data gaps largely prevent the ability to identify and understand health disparities for NHPI people. Data are insufficient or not disaggregated for NHPI people for a number of the examined measures. Among available data, NHPI people fare worse than White people for the majority of measures. There are no significant differences for some measures, but this largely reflects the smaller sample size for NHPI people in many datasets, which limits the power to detect statistically significant differences.

These data highlight the importance of continued efforts to address disparities in health and health care and show that it will be key for efforts to address factors both within and beyond the health care system. While these data provide insight into the status of disparities, ongoing data gaps and limitations hamper the ability to get a complete picture, particularly for smaller population groups and among subgroups of the broader racial and ethnic categories. As the share of people who identify as multiracial grows, it will be important to develop improved methods for understanding their experiences. How data are collected and reported by race and ethnicity is important for understanding disparities and efforts to address them. Recent changes to federal standards for collecting and reporting racial and ethnic data are intended to better represent the diversity of the population and will likely support greater disaggregation of data to identify and address disparities.

Racial Diversity Within the U.S. Today

Total population by race and ethnicity.

About four in ten people (42%) in the United States identify as people of color (Figure 2). This group includes 19% who are Hispanic, 12% who are Black, 6% who are Asian, 1% who are AIAN, less than 1% who are NHPI, and 5% who identify as another racial category, including individuals who identify as more than one race. The remaining 58% of the population are White. The share of the population who identify as people of color has been growing over time, with the largest growth occurring among those who identify as Hispanic or Asian. The racial diversity of the population is expected to continue to increase, with people of color projected to account for over half of the population by 2050. Recent changes to how data on race and ethnicity are collected and reported may also influence measures of the diversity of the population.

RACIAL DIVERSITY BY STATE

Certain areas of the country—particularly in the South, Southwest, and parts of the West—are more racially diverse than others (Figure 3). Overall, the share of the population who are people of color ranges from 10% or fewer in Maine, Vermont, and West Virginia to 50% or more of the population in California, District of Columbia, Georgia, Hawaii, Maryland, Nevada, New Mexico, and Texas. Most people of color live in the South and West. More than half (59%) of the Black population resides in the South, and nearly eight in ten Hispanic people live in the West (38%) or South (39%). About three quarters of the NHPI population (75%), almost half (49%) of the AIAN population, and 43% of the Asian population live in the Western region of the country.

TOTAL POPULATION BY AGE, RACE, AND ETHNICITY

People of color are younger compared to White people. Hispanic people are the youngest racial and ethnic group, with 31% ages 18 or younger and 56% below age 35 (Figure 4). Roughly half of Black (48%), AIAN (50%), and NHPI (51%) people are below age 35, compared to 42% of Asian people and 38% of White people.

Health Coverage, Access to and Use of Care

Racial disparities in health coverage, access, and use.

Overall, Hispanic and AIAN people fare worse compared to White people across most examined measures of health coverage, and access to and use of care (Figure 5). Black people fare worse than White people across half of these measures, and experiences for Asian people are mostly similar to or better than White people across these examined measures. NHPI people fare worse than White people across some measures, but several measures lacked sufficient data for a reliable estimate for NHPI people.

HEALTH COVERAGE

Despite gains in health coverage across racial and ethnic groups over time, nonelderly AIAN, Hispanic, NHPI, and Black people remain more likely to be uninsured compared to their White counterparts. After the Affordable Care Act (ACA), Medicaid, and Marketplace coverage expansions took effect in 2014, all racial and ethnic groups experienced large increases in coverage . Beginning in 2017, coverage gains began reversing and the number of uninsured people increased for three consecutive years. However, between 2019 and 2022, there were small gains in coverage across most racial and ethnic groups, with pandemic enrollment protections in Medicaid and enhanced ACA premium subsidies. Despite these gains over time, disparities in health coverage persist as of 2022. Nonelderly AIAN (19%) and Hispanic (18%) people have the highest uninsured rates (Figure 6). Uninsured rates for nonelderly NHPI (13%) and Black (10%) people are also higher than the rate for their White counterparts (7%). Nonelderly White (7%) and Asian (6%) people have the lowest uninsured rates.

ACCESS TO AND USE OF CARE

Most groups of nonelderly adults of color are more likely than nonelderly White adults to report not having a usual doctor or provider and going without care. Roughly one third (36%) of Hispanic adults, one quarter of AIAN (25%) and NHPI (24%) adults, and about one in five (21%) Asian adults report not having a personal health care provider compared to 17% of White adults (Figure 7). The share of Black adults who report not having a personal health care provider is the same as their White counterparts (17% for both). In addition, Hispanic (21%), NHPI (18%), AIAN (16%), and Black (14%) adults are more likely than White adults (11%) to report not seeing a doctor in the past 12 months because of cost, while Asian adults (8%) are less likely than White adults to say they went without a doctor visit due to cost. Hispanic (32%) and AIAN (31%) adults are more likely than White adults (28%) to say they went without a routine checkup in the past year, while Asian (26%), NHPI (24%), and Black (20%) adults are less likely to report going without a checkup. Hispanic and AIAN (both 45%) and Black (40%) adults are more likely than White adults (34%) to report going without a visit to a dentist or dental clinic in the past year.

In contrast to the patterns among adults, racial and ethnic differences in access to and use of care are more mixed for children. Nearly one in ten (9%) Hispanic children lack a usual source of care when sick compared to 5% of White children, but there are no significant differences for other groups for which data are available (Figure 8). Similar shares of Hispanic (7%), Asian (7%), and Black (4%) children went without a health care visit in the past year as White children (6%). However, higher shares of Asian (23%) and Black (21%) children went without a dental visit in the past year compared to White children (17%). Data are not available for NHPI children for these measures, and data for AIAN children should be interpreted with caution due to small sample sizes and large standard errors.

Among adults with any mental illness, Black, Hispanic, and Asian adults are less likely than White adults to report receiving mental health services. Roughly half (56%) of White adults with any mental illness report receiving mental health services in the past year. (Figure 9). In contrast, about four in ten (40%) Hispanic adults and just over a third of Black (38%) and Asian (36%) adults with any mental illness report receiving mental health care in the past year. Data are not available for AIAN and NHPI adults.

Experiences across racial and ethnic groups are mixed regarding receipt of recommended cancer screenings (Figure 10). Among women ages 50-74 (the age group recommended for screening prior to updates in 2024, which lowered the starting age to 40), Black people (24%) are less likely than White people (29%) to go without a recent mammogram. In contrast, AIAN (41%) and Hispanic (35%) people are more likely than White people (29%) to go without a mammogram. Among those recommended for colorectal cancer screening, Hispanic, Asian, AIAN, NHPI, and Black people are more likely than White people to not be up to date on their screening. Increases in cancer screenings, particularly for breast, colorectal, and prostate cancers, have been identified as one of the drivers of the decline in cancer mortality over the past few decades.

Racial and ethnic differences persist in flu and childhood vaccinations (Figure 11). Roughly six in ten Hispanic (63%), AIAN (63%), and Black (58%) adults went without a flu vaccine in the 2022-2023 season compared to about half (49%) of White adults. However, among children, White children (44%) are more likely than Asian (28%) and Hispanic (39%) children to go without the flu vaccine; data are not available to assess flu vaccinations among NHPI adults and children. In 2019-2020, AIAN (42%), Black (37%), and Hispanic (33%) children were more likely than White children (28%) to have not received all recommended childhood immunizations.

Health Status and Outcomes

Racial disparities in health status and outcomes.

Black and AIAN people fare worse than White people across the majority of examined measures of health status and outcomes (Figure 12). In contrast, Asian and Hispanic people fare better than White people for a majority of examined health measures. Nearly half of the examined measures did not have data available for NHPI people, limiting the ability to understand their experiences. Among available data, NHPI people fare worse than White people for more than half of the examined measures.   

LIFE EXPECTANCY

AIAN and Black people have a shorter life expectancy at birth compared to White people, and AIAN, Hispanic, and Black people experienced larger declines in life expectancy than White people between 2019 and 2021. Life expectancy at birth represents the average number of years a group of infants would live if they were to experience the age-specific death rates prevailing during a specified period. Life expectancy declined by 2.7 years between 2019 and 2021, largely reflecting an increase in excess deaths due to COVID-19, which disproportionately impacted Black, Hispanic, and AIAN people. AIAN people experienced the largest life expectancy decline of 6.6 years, followed by Hispanic (4.2 years) and Black people (4.0 years), and a smaller decline of 2.4 years for White people. Asian people had the smallest decline in life expectancy of 2.1 years between 2019 and 2021. Provisional data from 2022 show that overall life expectancy increased across all racial and ethnic groups between 2021 and 2022, but racial disparities persist (Figure 13). Life expectancy is lowest for AIAN people at 67.9 years, followed by Black people at 72.8 years, while White and Hispanic people have higher life expectancies of 77.5 and 80 years, respectively, and Asian people have the highest life expectancy at 84.5 years. Life expectancies are even lower for AIAN and Black males, at 64.6 and 69.1 years, respectively. Data are not available for NHPI people.

SELF-REPORTED HEALTH STATUS

Black, Hispanic, and AIAN adults are more likely to report fair or poor health status than their White counterparts, while Asian adults are less likely to indicate fair or poor health. Nearly three in ten (29%) AIAN adults and roughly two in ten Hispanic (23%) and Black (21%) adults report fair or poor health status compared to 16% of White adults (Figure 14). One in ten Asian adults report fair or poor health status.

BIRTH RISKS AND OUTCOMES

NHPI (62.8 per 100,000), Black (39.9 per 100,000), and AIAN (32 per 100,000) women have the highest rates of pregnancy-related mortality (deaths within one year of pregnancy) between 2017-2019, while Hispanic women (11.6 per 100,000) have the lowest rate (Figure 15). More recent data for maternal mortality, which measures deaths that occur during pregnancy or within 42 days of pregnancy, shows that Black women (49.5 per 100,000) have the highest maternal mortality rate across racial and ethnic groups in 2022 (Figure 16). However, maternal mortality rates decreased significantly across most racial and ethnic groups between 2021 and 2022. Experts suggest the decline may reflect a return to pre-pandemic levels following the large increase in maternal death rates due to COVID-19 related deaths. The Dobbs decision eliminating the constitutional right to abortion could widen the already large disparities in maternal health as people of color may face disproportionate challenges accessing abortions due to state restrictions.

Black, AIAN, and NHPI women have higher shares of preterm births, low birthweight births, or births for which they received late or no prenatal care compared to White women (Figure 17). Additionally, Asian women are more likely to have low birthweight births than White women. Notably, NHPI women (22%) are four times more likely than White women (5%) to begin receiving prenatal care in the third trimester or to receive no prenatal care at all.

Teen birth rates have declined over time, but the birth rates among Black, Hispanic, AIAN, and NHPI teens are over two times higher than the rate among White teens (Figure 18). In contrast, the birth rate for Asian teens is more than four times lower than the rate for White teens.

Infants born to women of color are at higher risk for mortality compared to those born to White women. Infant mortality rates have declined over time although provisional 2022 data suggest a slight increase relative to 2021. As of 2022, Black (10.9 per 1,000) and AIAN (9.1 per 1,000) infants are at least two times as likely to die as White infants (4.5 per 1,000) (Figure 19). NHPI infants (8.5 per 1,000) are nearly twice as likely to die as White infants (4.5 per 1,000). Asian infants have the lowest mortality rate at 3.5 per 1,000 live births.

HIV AND AIDS DIAGNOSIS INDICATORS

Black, Hispanic, NHPI, and AIAN people are more likely than White people to be diagnosed with HIV or AIDS, the most advanced stage of HIV infection. In 2021, the HIV diagnosis rate for Black people is roughly eight times higher than the rate for White people, and the rate for Hispanic people is about four times higher than the rate for White people (Figure 20). AIAN and NHPI people also have higher HIV diagnosis rates compared to White people. Similar patterns are present in AIDS diagnosis rates, the most advanced stage of HIV, reflecting barriers to treatment. Black people have a roughly nine times higher rate of AIDS diagnosis compared to White people, and Hispanic, AIAN, and NHPI people also have higher rates of AIDS diagnoses. Most groups have seen decreases in HIV and AIDS diagnosis rates since 2013, although the HIV diagnosis rate has remained stable for Hispanic people and increased for AIAN and NHPI people.

Among people ages 13 and older living with diagnosed HIV infection, viral suppression rates are lower among AIAN (64%), Hispanic (64%), NHPI (63%), and Black (62%) people compared with White (72%) and Asian (70%) people (Figure 21) . Viral suppression refers to having less than 200 copies of HIV per milliliter of blood. Increasing the viral suppression rate among people with HIV is one of the key strategies of the Ending the HIV Epidemic in the U.S. initiative. Viral suppression promotes optimal health outcomes for people with HIV and also offers a preventive benefit as when someone is virally suppressed, they cannot sexually transmit HIV.

CHRONIC DISEASE AND CANCER

The prevalence of chronic disease varies across racial and ethnic groups and by type of disease. Diabetes rates for AIAN (18%), Black (16%), and Hispanic (13%) adults are all higher than the rate for White adults (11%). AIAN people (11%) are more likely to have had a heart attack or heart disease than White people (8%), while rates for Black (6%), NHPI (6%), Hispanic (4%) and Asian (3%) people are lower than White people. Black (12%) and AIAN (13%) adults have higher rates of asthma compared to their White counterparts (10%), while rates for Hispanic (8%) and Asian (5%) adults are lower, and the rate for NHPI is the same (10%). Among children, Black children (16%) are nearly twice as likely to have asthma compared to White children (9%), while Asian children (6%) have a lower asthma rate (Figure 22). Differences are not significant for other racial and ethnic groups, and data are not available for NHPI children.

AIAN, NHPI, and Black people are roughly twice as likely as White people to die from diabetes, and Black people are more likely than White people to die from heart disease (Figure 23). Hispanic people (28.3 per 100,000) also have a higher diabetes death rate compared to White people (21.3 per 100,000). In contrast, Asian people (17.2 per 100,000) are less likely than White people (21.3 per 100,000) to die from diabetes, and AIAN, Hispanic, and Asian people have lower heart disease death rates than their White counterparts.

People of color generally have lower rates of new cancer cases compared to White people, but Black people have higher incidence rates for some cancer types (Figure 24). Black people have lower rates of cancer incidence compared to White people for cancer overall, and most of the leading types of cancer examined. However, they have higher rates of new colon, and rectum, and prostate cancer. AIAN people have a higher rate of colon and rectum cancer than White people. Other groups have lower cancer incidence rates than White people across all examined cancer types.

Although Black people do not have higher cancer incidence rates than White people overall and across most types of cancer, they are more likely to die from cancer. Black people have a higher cancer death rate than White people for cancer overall and for most of the leading cancer types (Figure 25). In contrast, Hispanic, Asian and Pacific Islander, and AIAN people have lower cancer mortality rates across most cancer types compared to White people. The higher mortality rate among Black people despite similar or lower rates of incidence compared to White people could reflect a combination of factors , including more limited access to care, later stage of diagnosis, more comorbidities, and lower receipt of guideline-concordant care, which are driven by broader social and economic inequities.

COVID-19 DEATHS

AIAN, Hispanic, NHPI, and Black people have higher rates of COVID-19 deaths compared to White people. As of March 2024, provisional age-adjusted data from the Centers for Disease Control and Prevention (CDC) show that between 2020 and 2023, AIAN people are roughly two times as likely as White people to die from COVID-19, and Hispanic, NHPI and Black people are about 1.5 times as likely to die from COVID-19 (Figure 26). Asian people have lower COVID-19 death rates during this period compared to all other race and ethnicity groups.

Obesity rates vary across race and ethnicity groups. As of 2022, Black (43%), AIAN (39%), and Hispanic (37%) adults all have higher obesity rates than White adults (32%), while Asian adults (13%) have a lower obesity rate (Figure 27).

Mental Health and Drug Overdose Deaths

Overall rates of mental illness are lower for people of color compared to White people but could be underdiagnosed among people of color. About one in five Hispanic and Black (21% and 20%, respectively) adults and 17% of Asian adults report having a mental illness compared to 25% of White adults (Figure 28). Among  adolescents , the share with symptoms of a past year major depressive episode were not significantly different across racial and ethnic groups, with roughly one in five White (21%) and Hispanic (20%) adolescents, 17% of Black, and about one in seven Asian (15%), and AIAN (14%) adolescents reporting symptoms. Data are not available for NHPI people. Research suggests that a lack of  culturally sensitive  screening  tools  that detect mental illness, coupled with  structural barriers could contribute to  underdiagnosis  of mental illness among people of color.

AIAN and White people have the highest rates of deaths by suicide as of 2022. People of color have been disproportionately affected by recent increases in deaths by suicide compared with their White counterparts. As of 2022, AIAN (27.1 per 100,000) and White (17.6 per 100,000) people have the highest rates of deaths by suicide compared to all other racial and ethnic groups (Figure 29). Rates of deaths by suicide are also over three times higher among AIAN adolescents (32.9 per 100,000) than White adolescents (10.6 per 100,000). In contrast, Black, Hispanic, and Asian adolescents have lower rates of suicide deaths compared to their White peers.

Drug overdose death rates increased among AIAN, Black, Hispanic, and Asian people between 2021 and 2022. As of 2022, AIAN people continue to have the highest rates of drug overdose deaths (65.2 per 100,000 in 2022) compared with all other racial and ethnic groups. Drug overdose death rates among Black people (47.5 per 100,000) exceed rates for White people (35.6 per 100,000), reflecting larger increases among Black people in recent years (Figure 30). Hispanic (22.7 per 100,000), NHPI (18.8 per 100,000), and Asian (5.3 per 100,000) people have lower rates of drug overdose deaths than White people (35.6 per 100,000). Data on drug overdose deaths among adolescents show that while White adolescents account for the largest share of drug overdose deaths, Black and Hispanic adolescents have experienced the fastest increase in these deaths in recent years.

Social Determinants of Health

Racial disparities in social and economic factors.

Social determinants of health are the conditions in which people are born, grow, live, work, and age. They include factors like socioeconomic status, education, immigration status, language, neighborhood and physical environment, employment, and social support networks, as well as access to health care. There has been extensive research and recognition that addressing social, economic, and environmental factors that influence health is important for advancing health equity. Research also shows how racism and discrimination drive inequities across these factors and impact health and well-being.  

Black, Hispanic, AIAN, and NHPI people fare worse compared to White people across most examined measures of social determinants of health (Figure 31). Experiences for Asian people are more mixed relative to White people across these examined measures. Reliable or disaggregated data for NHPI people are missing for a number of measures.

WORK STATUS, FAMILY INCOME, AND EDUCATION

Across racial and ethnic groups, most nonelderly people live in a family with a full-time worker, but Black, Hispanic, AIAN, and NHPI nonelderly people are more likely than White people to be in a family with income below poverty (Figure 32). While most people across racial and ethnic groups live in a family with a full-time worker, disparities persist. AIAN (68%), Black (73%), NHPI (77%), and Hispanic (81%) people are less likely than White people (83%) to have a full-time worker in the family. In contrast, Asian people (86%) are more likely than their White counterparts (83%) to have a full-time worker in the family. Despite the majority of people living in a family with a full-time worker, over one in five AIAN (25%) and Black (22%) people have family incomes below the federal poverty level, over twice the share as White people (10%), and rates of poverty were also higher among Hispanic (17%) and NHPI (16%) people.

Black, Hispanic, AIAN, and NHPI people have lower levels of educational attainment compared to their White counterparts. Among people ages 25 and older, over two thirds (69%) of White people have completed some post-secondary education, compared to less than half (45%) of Hispanic people, just over half of AIAN and NHPI people (both at 52%), and about six in ten Black people (58%) (Figure 33). Asian people are more likely than White people to have completed at least some post-secondary education, with 74% completing at least some college.

NET WORTH AND HOME OWNERSHIP

Black and Hispanic families have less wealth than White families. Wealth can be defined using net worth, a measure of the difference between a family’s assets and liabilities. The median net worth for White households is $285,000 compared to $44,900 for Black households and $61,600 for Hispanic households (Figure 34). Asian households have the highest median net worth of $536,000. Data are not available for AIAN and NHPI people.

People of color are less likely to own a home than White people (Figure 35). Nearly eight in ten (77%) White people own a home compared to 70% of Asian people, 62% of AIAN people, 55% of Hispanic people, and about half of Black (49%) and NHPI (48%) people.

FOOD SECURITY, HOUSING QUALITY, AND INTERNET ACCESS

Black and Hispanic adults and children are more likely to experience food insecurity compared to their White counterparts. Among adults, AIAN (18%), Black (14%), and Hispanic (12%) adults report low or very low food security compared to White adults (6%) (Figure 36). Among children, AIAN (24%), Black (21%) and Hispanic (15%) children are over twice as likely to be food insecure than White children (6%). Data are not available for NHPI adults and children.

People of color are more likely to live in crowded housing than their White counterparts (Figure 37). Among White people, 3% report living in a crowded housing arrangement, that is having more than one person per room, as defined by the American Community Survey. In contrast, almost three in ten (28%) NHPI people, roughly one in five (18%) Hispanic people, 16% AIAN people, and about one in ten Asian (12%) and Black (8%) people report living in crowded housing.

AIAN, NHPI, and Black people are less likely to have internet access than White people (Figure 38). Higher shares of AIAN (12%), and Black and NHPI people (both at 6%) say they have no internet access compared to their White counterparts (4%). In contrast, Asian people (2%) are less likely to report no internet access than White people (4%).

TRANSPORTATION

People of color are more likely to live in a household without access to a vehicle than White people (Figure 39) . About one in eight Black people (12%) and about one in ten AIAN (9%) and Asian (8%) people live in a household without a vehicle available followed by 7% of Hispanic and NHPI people. White people are the least likely to report not having access to a vehicle in the household (4%).

CITIZENSHIP AND ENGLISH PROFICIENCY

Asian, Hispanic, NHPI, and Black people include higher shares of noncitizen immigrants compared to White people. Asian and Hispanic people have the highest shares of noncitizen immigrants at 25% and 19%, respectively (Figure 40). Asian people are projected to become the largest immigrant group in the United States by 2055. Immigrants are more likely to be uninsured than citizens and face increased barriers to accessing health care.

Hispanic and Asian people are more likely to have LEP compared to White people. Almost one in three Asian (31%) and Hispanic (28%) people report speaking English less than very well compared to White people (1%)(Figure 41). Adults with LEP are more likely to report worse health status and increased barriers in accessing health care compared to English proficient adults.

EXPERIENCES WITH RACISM, DISCRIMINATION, AND UNFAIR TREATMENT

Racism is an underlying driver of health disparities, and repeated and ongoing exposure to perceived experiences of racism and discrimination can increase risks for poor health outcomes. Research has shown that exposure to racism and discrimination can lead to  negative  mental health  outcomes  and certain negative impacts on physical health, including depression, anxiety, and hypertension.

Black, AIAN, Hispanic, and Asian adults are more likely to report certain experiences with discrimination in daily life compared with their White counterparts, with the greatest frequency reported among Black and AIAN adults.  A 2023 KFF survey shows that at least half of AIAN (58%), Black (54%), and Hispanic (50%) adults and about four in ten (42%) Asian adults say they experienced at least one type of discrimination in daily life in the past year (Figure 42). These experiences include receiving poorer service than others at restaurants or stores; people acting as if they are afraid of them or as if they aren’t smart; being threatened or harassed; or being criticized for speaking a language other than English. Data are not available for NHPI adults.

About one in five (18%) Black adults and roughly one in eight AIAN (12%) adults, followed by roughly one in ten Hispanic (11%), and Asian (10%) adults who received health care in the past three years report being treated unfairly or with disrespect by a health care provider because of their racial or ethnic background.  These shares are higher than the 3% of White adults who report this (Figure 43). Overall, roughly three in ten (29%) AIAN adults and one in four (24%) Black adults say they were treated unfairly or with disrespect by a health care provider in the past three years for any reason compared with 14% of White adults.

About the Data

Data sources.

This chart pack is based on the KFF Survey on Racism, Discrimination, and Health and KFF analysis of a wide range of health datasets, including the 2022 American Community Survey, the 2022 Behavioral Risk Factor Surveillance System, the 2022 National Health Interview Survey, the 2022 National Survey on Drug Use and Health, and the 2022 Survey of Consumer Finances as well as from several online reports and databases including the Centers for Disease Control and Prevention (CDC) Morbidity and Mortality Weekly Report (MMWR) on vaccination coverage, the National Center for Health Statistics (NCHS) National Vital Statistics Reports, the CDC Influenza Vaccination Dashboard Flu Vaccination Coverage Webpage Report, the National Center for HIV/AIDS, Viral Hepatitis, STD, and TB Prevention (NCHHSTP) Atlas, the United States Cancer Statistics Incidence and Mortality Web-based Report, the 2022 CDC Natality Public Use File, CDC Web-based Injury Statistics Query and Reporting System (WISQARS) database, and the CDC WONDER online database.

Methodology

Unless otherwise noted, race/ethnicity was categorized by non-Hispanic White (White), non-Hispanic Black (Black), Hispanic, non-Hispanic American Indian and Alaska Native (AIAN), non-Hispanic Asian (Asian), and non-Hispanic Native Hawaiian or Pacific Islander (NHPI). Some datasets combine Asian and NHPI race categories limiting the ability to disaggregate data for these groups. Non-Hispanic White persons were the reference group for all significance testing. All noted differences were statistically significant differences at the p<0.05. We include data for smaller population groups wherever available. Instances in which the unweighted sample size for a subgroup is less than 50 or the relative standard error is greater than 30% are noted in the figures, and confidence intervals for those measures are included in the figure.

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Cite report

IEA (2024), World Energy Investment 2024 , IEA, Paris https://www.iea.org/reports/world-energy-investment-2024, Licence: CC BY 4.0

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The world now invests almost twice as much in clean energy as it does in fossil fuels…, global investment in clean energy and fossil fuels, 2015-2024, …but there are major imbalances in investment, and emerging market and developing economies (emde) outside china account for only around 15% of global clean energy spending, annual investment in clean energy by selected country and region, 2019 and 2024, investment in solar pv now surpasses all other generation technologies combined, global annual investment in solar pv and other generation technologies, 2021-2024, the integration of renewables and upgrades to existing infrastructure have sparked a recovery in spending on grids and storage, investment in power grids and storage by region 2017-2024, rising investments in clean energy push overall energy investment above usd 3 trillion for the first time.

Global energy investment is set to exceed USD 3 trillion for the first time in 2024, with USD 2 trillion going to clean energy technologies and infrastructure. Investment in clean energy has accelerated since 2020, and spending on renewable power, grids and storage is now higher than total spending on oil, gas, and coal.

As the era of cheap borrowing comes to an end, certain kinds of investment are being held back by higher financing costs. However, the impact on project economics has been partially offset by easing supply chain pressures and falling prices. Solar panel costs have decreased by 30% over the last two years, and prices for minerals and metals crucial for energy transitions have also sharply dropped, especially the metals required for batteries.

The annual World Energy Investment report has consistently warned of energy investment flow imbalances, particularly insufficient clean energy investments in EMDE outside China. There are tentative signs of a pick-up in these investments: in our assessment, clean energy investments are set to approach USD 320 billion in 2024, up by more 50% since 2020. This is similar to the growth seen in advanced economies (+50%), although trailing China (+75%). The gains primarily come from higher investments in renewable power, now representing half of all power sector investments in these economies. Progress in India, Brazil, parts of Southeast Asia and Africa reflects new policy initiatives, well-managed public tenders, and improved grid infrastructure. Africa’s clean energy investments in 2024, at over USD 40 billion, are nearly double those in 2020.

Yet much more needs to be done. In most cases, this growth comes from a very low base and many of the least-developed economies are being left behind (several face acute problems servicing high levels of debt). In 2024, the share of global clean energy investment in EMDE outside China is expected to remain around 15% of the total. Both in terms of volume and share, this is far below the amounts that are required to ensure full access to modern energy and to meet rising energy demand in a sustainable way.

Power sector investment in solar photovoltaic (PV) technology is projected to exceed USD 500 billion in 2024, surpassing all other generation sources combined. Though growth may moderate slightly in 2024 due to falling PV module prices, solar remains central to the power sector’s transformation. In 2023, each dollar invested in wind and solar PV yielded 2.5 times more energy output than a dollar spent on the same technologies a decade prior.

In 2015, the ratio of clean power to unabated fossil fuel power investments was roughly 2:1. In 2024, this ratio is set to reach 10:1. The rise in solar and wind deployment has driven wholesale prices down in some countries, occasionally below zero, particularly during peak periods of wind and solar generation. This lowers the potential for spot market earnings for producers and highlights the need for complementary investments in flexibility and storage capacity.

Investments in nuclear power are expected to pick up in 2024, with its share (9%) in clean power investments rising after two consecutive years of decline. Total investment in nuclear is projected to reach USD 80 billion in 2024, nearly double the 2018 level, which was the lowest point in a decade.

Grids have become a bottleneck for energy transitions, but investment is rising. After stagnating around USD 300 billion per year since 2015, spending is expected to hit USD 400 billion in 2024, driven by new policies and funding in Europe, the United States, China, and parts of Latin America. Advanced economies and China account for 80% of global grid spending. Investment in Latin America has almost doubled since 2021, notably in Colombia, Chile, and Brazil, where spending doubled in 2023 alone. However, investment remains worryingly low elsewhere.

Investments in battery storage are ramping up and are set to exceed USD 50 billion in 2024. But spending is highly concentrated. In 2023, for every dollar invested in battery storage in advanced economies and China, only one cent was invested in other EMDE.

Investment in energy efficiency and electrification in buildings and industry has been quite resilient, despite the economic headwinds. But most of the dynamism in the end-use sectors is coming from transport, where investment is set to reach new highs in 2024 (+8% compared to 2023), driven by strong electric vehicle (EV) sales.

The rise in clean energy spending is underpinned by emissions reduction goals, technological gains, energy security imperatives (particularly in the European Union), and an additional strategic element: major economies are deploying new industrial strategies to spur clean energy manufacturing and establish stronger market positions. Such policies can bring local benefits, although gaining a cost-competitive foothold in sectors with ample global capacity like solar PV can be challenging. Policy makers need to balance the costs and benefits of these programmes so that they increase the resilience of clean energy supply chains while maintaining gains from trade.

In the United States, investment in clean energy increases to an estimated more than USD 300 billion in 2024, 1.6 times the 2020 level and well ahead of the amount invested in fossil fuels. The European Union spends USD 370 billion on clean energy today, while China is set to spend almost USD 680 billion in 2024, supported by its large domestic market and rapid growth in the so-called “new three” industries: solar cells, lithium battery production and EV manufacturing.

Overall upstream oil and gas investment in 2024 is set to return to 2017 levels, but companies in the Middle East and Asia now account for a much larger share of the total

Change in upstream oil and gas investment by company type, 2017-2024, newly approved lng projects, led by the united states and qatar, bring a new wave of investment that could boost global lng export capacity by 50%, investment and cumulative capacity in lng liquefaction, 2015-2028, investment in fuel supply remains largely dominated by fossil fuels, although interest in low-emissions fuels is growing fast from a low base.

Upstream oil and gas investment is expected to increase by 7% in 2024 to reach USD 570 billion, following a 9% rise in 2023. This is being led by Middle East and Asian NOCs, which have increased their investments in oil and gas by over 50% since 2017, and which account for almost the entire rise in spending for 2023-2024.

Lower cost inflation means that the headline rise in spending results in an even larger rise in activity, by approximately 25% compared with 2022. Existing fields account for around 40% total oil and gas upstream investment, while another 33% goes to new fields and exploration. The remainder goes to tight oil and shale gas.

Most of the huge influx of cashflows to the oil and gas industry in 2022-2023 was either returned to shareholders, used to buy back shares or to pay down debt; these uses exceeded capital expenditure again in 2023. A surge in profits has also spurred a wave of mergers and acquisitions (M&A), especially among US shale companies, which represented 75% of M&A activity in 2023. Clean energy spending by oil and gas companies grew to around USD 30 billion in 2023 (of which just USD 1.5 billion was by NOCs), but this represents less than 4% of global capital investment on clean energy.

A significant wave of new investment is expected in LNG in the coming years as new liquefaction plants are built, primarily in the United States and Qatar. The concentration of projects looking to start operation in the second half of this decade could increase competition and raise costs for the limited number of specialised contractors in this area. For the moment, the prospect of ample gas supplies has not triggered a major reaction further down the value chain. The amount of new gas-fired power capacity being approved and coming online remains stable at around 50-60 GW per year.

Investment in coal has been rising steadily in recent years, and more than 50 GW of unabated coal-fired power generation was approved in 2023, the most since 2015, and almost all of this was in China.

Investment in low-emissions fuels is only 1.4% of the amount spent on fossil fuels (compared to about 0.5% a decade ago). There are some fast-growing areas. Investments in hydrogen electrolysers have risen to around USD 3 billion per year, although they remain constrained by uncertainty about demand and a lack of reliable offtakers. Investments in sustainable aviation fuels have reached USD 1 billion, while USD 800 million is going to direct air capture projects (a 140% increase from 2023). Some 20 commercial-scale carbon capture utilisation and storage (CCUS) projects in seven countries reached final investment decision (FID) in 2023; according to company announcements, another 110 capture facilities, transport and storage projects could do the same in 2024.

Energy investment decisions are primarily driven and financed by the private sector, but governments have essential direct and indirect roles in shaping capital flows

Sources of investment in the energy sector, average 2018-2023, sources of finance in the energy sector, average 2018-2023, households are emerging as important actors for consumer-facing clean energy investments, highlighting the importance of affordability and access to capital, change in energy investment volume by region and fuel category, 2016 versus 2023, market sentiment around sustainable finance is down from the high point in 2021, with lower levels of sustainable debt issuances and inflows into sustainable funds, sustainable debt issuances, 2020-2023, sustainable fund launches, 2020-2023, energy transitions are reshaping how energy investment decisions are made, and by whom.

This year’s World Energy Investment report contains new analysis on sources of investments and sources of finance, making a clear distinction between those making investment decisions (governments, often via state-owned enterprises (SOEs), private firms and households) and the institutions providing the capital (the public sector, commercial lenders, and development finance institutions) to finance these investments.

Overall, most investments in the energy sector are made by corporates, with firms accounting for the largest share of investments in both the fossil fuel and clean energy sectors. However, there are significant country-by-country variations: half of all energy investments in EMDE are made by governments or SOEs, compared with just 15% in advanced economies. Investments by state-owned enterprises come mainly from national oil companies, notably in the Middle East and Asia where they have risen substantially in recent years, and among some state-owned utilities. The financial sustainability, investment strategies and the ability for SOEs to attract private capital therefore become a central issue for secure and affordable transitions.

The share of total energy investments made or decided by private households (if not necessarily financed by them directly) has doubled from 9% in 2015 to 18% today, thanks to the combined growth in rooftop solar installations, investments in buildings efficiency and electric vehicle purchases. For the moment, these investments are mainly made by wealthier households – and well-designed policies are essential to making clean energy technologies more accessible to all . A comparison shows that households have contributed to more than 40% of the increase in investment in clean energy spending since 2016 – by far the largest share. It was particularly pronounced in advanced economies, where, because of strong policy support, households accounted for nearly 60% of the growth in energy investments.

Three quarters of global energy investments today are funded from private and commercial sources, and around 25% from public finance, and just 1% from national and international development finance institutions (DFIs).

Other financing options for energy transition have faced challenges and are focused on advanced economies. In 2023, sustainable debt issuances exceeded USD 1 trillion for the third consecutive year, but were still 25% below their 2021 peak, as rising coupon rates dampened issuers’ borrowing appetite. Market sentiment for sustainable finance is wavering, with flows to ESG funds decreasing in 2023, due to potential higher returns elsewhere and credibility concerns. Transition finance is emerging to mobilise capital for high-emitting sectors, but greater harmonisation and credible standards are required for these instruments to reach scale.

A secure and affordable transitioning away from fossil fuels requires a major rebalancing of investments

Investment change in 2023-2024, and additional average annual change in investment in the net zero scenario, 2023-2030, a doubling of investments to triple renewables capacity and a tripling of spending to double efficiency: a steep hill needs climbing to keep 1.5°c within reach, investments in renewables, grids and battery storage in the net zero emissions by 2050 scenario, historical versus 2030, investments in end-use sectors in the net zero emissions by 2050 scenario, historical versus 2030, meeting cop28 goals requires a doubling of clean energy investment by 2030 worldwide, and a quadrupling in emde outside china, investments in renewables, grids, batteries and end use in the net zero emissions by 2050 scenario, 2024 and 2030, mobilising additional, affordable financing is the key to a safer and more sustainable future, breakdown of dfi financing by instrument, currency, technology and region, average 2019-2022, much greater efforts are needed to get on track to meet energy & climate goals, including those agreed at cop28.

Today’s investment trends are not aligned with the levels necessary for the world to have a chance of limiting global warming to 1.5°C above pre-industrial levels and to achieve the interim goals agreed at COP28. The current momentum behind renewable power is impressive, and if the current spending trend continues, it would cover approximately two-thirds of the total investment needed to triple renewable capacity by 2030. But an extra USD 500 billion per year is required in the IEA’s Net Zero Emissions by 2050 Scenario (NZE Scenario) to fill the gap completely (including spending for grids and battery storage). This equates to a doubling of current annual spending on renewable power generation, grids, and storage in 2030, in order to triple renewable capacity.

The goal of doubling the pace of energy efficiency improvement requires an even greater additional effort. While investment in the electrification of transport is relatively strong and brings important efficiency gains, investment in other efficiency measures – notably building retrofits – is well below where it needs to be: efficiency investments in buildings fell in 2023 and are expected to decline further in 2024. A tripling in the current annual rate of spending on efficiency and electrification – to about USD 1.9 trillion in 2030 – is needed to double the rate of energy efficiency improvements.

Anticipated oil and gas investment in 2024 is broadly in line with the level of investment required in 2030 in the Stated Policies Scenario, a scenario which sees oil and natural gas demand levelling off before 2030. However, global spare oil production capacity is already close to 6 million barrels per day (excluding Iran and Russia) and there is a shift expected in the coming years towards a buyers’ market for LNG. Against this backdrop, the risk of over-investment would be strong if the world moves swiftly to meet the net zero pledges and climate goals in the Announced Pledges Scenario (APS) and the NZE Scenario.

The NZE Scenario sees a major rebalancing of investments in fuel supply, away from fossil fuels and towards low-emissions fuels, such as bioenergy and low-emissions hydrogen, as well as CCUS. Achieving net zero emissions globally by 2050 would mean annual investment in oil, gas, and coal falls by more than half, from just over USD 1 trillion in 2024 to below USD 450 billion per year in 2030, while spending on low-emissions fuels increases tenfold, to about USD 200 billion in 2030 from just under USD 20 billion today.

The required increase in clean energy investments in the NZE Scenario is particularly steep in many emerging and developing economies. The cost of capital remains one of the largest barriers to investment in clean energy projects and infrastructure in many EMDE, with financing costs at least twice as high as in advanced economies as well as China. Macroeconomic and country-specific factors are the major contributors to the high cost of capital for clean energy projects, but so, too, are risks specific to the energy sector. Alongside actions by national policy makers, enhanced support from DFIs can play a major role in lowering financing costs and bringing in much larger volumes of private capital.

Targeted concessional support is particularly important for the least-developed countries that will otherwise struggle to access adequate capital. Our analysis shows cumulative financing for energy projects by DFIs was USD 470 billion between 2013 and 2021, with China-based DFIs accounting for slightly over half of the total. There was a significant reduction in financing for fossil fuel projects over this period, largely because of reduced Chinese support. However, this was not accompanied by a surge in support for clean energy projects. DFI support was provided almost exclusively (more than 90%) as debt (not all concessional) with only about 3% reported as equity financing and about 6% as grants. This debt was provided in hard currency or in the currency of donors, with almost no local-currency financing being reported.

The lack of local-currency lending pushes up borrowing costs and in many cases is the primary reason behind the much higher cost of capital in EMDE compared to advanced economies. High hedging costs often make this financing unaffordable to many of the least-developed countries and raises questions of debt sustainability. More attention is needed from DFIs to focus interventions on project de-risking that can mobilise much higher multiples of private capital.

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Walmart (wmt) benefits from impressive e-commerce operations, exxonmobil's (xom) stabroek & permian oil discoveries aid, strong life sciences unit aids danaher (dhr), high debt ails.

Thursday, June 20, 2024 The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Walmart Inc. (WMT), Exxon Mobil Corporation (XOM) and Danaher Corporation (DHR), as well as a micro-cap stock GSI Technology, Inc. (GSIT). The Zacks microcap research is unique as our research content on these small and under-the-radar companies is the only research of its type in the country. These research reports have been hand-picked from the roughly 70 reports spublished by our analyst team today. You can see all of today’s research reports here >>> Walmart shares have outperformed the Zacks Retail sector over the past year (+31.5% vs. +23%), with the outperformance notably accelerating following the retail giant's last quarterly release. The company is gaining from its highly diversified business with contributions from various segments, channels and formats. Walmart has been benefiting from an increase in in-store and digital channel traffic due to its robust omnichannel initiatives. Store-fulfilled delivery sales jumped 50% in the fourth quarter of fiscal 2024. The strategic focus on enhancing delivery services has also been rewarding, as evidenced by the constant increase in the market share for groceries. Upsides like these, along with growth in the advertising business, fueled Walmart’s fourth-quarter results and led to an encouraging fiscal 2025 view. However, the retail landscape continues to be dynamic due to challenges like inflation and volatile consumer spending. High SG&A expenses are also a concern. (You can read the full research report on Walmart here >>> ) Shares of Exxon Mobil have outperformed the Zacks Oil and Gas - Integrated - International industry over the past year (+5.3% vs. +3.7%). The company is a reliable player in the energy sector, it boasts a resilient capital structure and a track record of prudent capex management. Its strategic discoveries in the Stabroek Block and Permian Basin promise growth and lower greenhouse gas intensity. With a robust balance sheet, ExxonMobil prioritizes shareholder returns, evidenced by substantial buybacks and the strategic acquisition of Pioneer Natural Resources. The company aims to increase its annual share buybacks to $20 billion through 2025. However, challenges loom, notably in the upstream operations, which are susceptible to volatile oil prices and regulatory hurdles. While committed to shareholders, ExxonMobil faces scrutiny for lagging industry peers in terms of dividend yield. Reliance on finding economically recoverable reserves and exposure to OPEC production cuts add to uncertainties. (You can read the full research report on Exxon Mobil here >>> ) Danaher shares have outperformed the Zacks Diversified Operations industry over the year-to-date period (+11.3% vs. -2.6%). The company’s stable demand in the academic and applied markets is supporting its Life Sciences segment. The segment has been witnessing positive responses toward its new products. Danaher’s commitment to return value to shareholders is encouraging. Synergies from the Abcam acquisition bolster the company’s growth. Through company’s DBS initiatives, it has been able to reduce the impact of supply-chain constraints and inflationary pressures. However, Danaher is plagued by weakness in the Biotechnology unit due to decreased demand in the bioprocessing business. An increase in cost of sales may continue affecting the company’s margin performance. High debt levels may raise its financial obligations and drain its profitability. Given the company’s international exposure, forex woes are weighing on its top line. (You can read the full research report on Danaher here >>> ) Shares of GSI Technology have underperformed the Zacks Computer- Storage Devices industry over the year-to-date period (+1.1% vs. +94.0%). This microcap company with market capitalization of $67.94 million saw significant losses and declining revenues, with potential liquidity issues highlighted by a drop in cash reserves to $14.4 million. Competitive pressures from major HPC players presents significant risks. Nevertheless, GSI Technology's strategic advancements with the Gemini-I and Gemini-II APUs mark significant progress in HPC and AI processing, offering substantial performance gains and catering to high-capacity, low-power applications. The growing HPC market, driven by AI, IoT, and data-intensive applications, presents an opportunity for GSI to capture a significant share, especially in sectors like aerospace, defense, energy, and healthcare. The sale and leaseback of its headquarters add $11.9 million for R&D, while successful shipments of radiation-hardened products for the ESA mission open high-margin market opportunities. (You can read the full research report on GSI Technology here >>> ) Other noteworthy reports we are featuring today include American Express Company (AXP), Marriott International, Inc. (MAR) and Lennar Corporation (LEN). Director of Research Sheraz Mian Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>

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