Equity Research Report Writing Process
Equity Research Report Writing Process
Equity Research Report Writing Process
After completing the fundamental analysis, financial statement analysis, ratio analysis,
and valuation, the last part of the equity research process is writing equity research
reports.
As an equity research analyst, you need to analyze the industry and the company first
and then write the stock research report.
This is important to write the equity research reports in such a way that your clients
understand every word of it.
It’s also important to include relevant analysis that you’ve done in the report.
2. Relative valuation
Before writing the report, have a clear view of the company in terms of—Investment
rationale, risk assessment, key growth drivers, cost drivers, and revenue drivers.
2. Recommendation/Rating
Clearly write the company’s name at the top of the report and mention your
recommendation—buy, sell, hold.
You can also use the words—outperform, underperform, neutral or accumulate based
on your valuation.
Have an image of an equity research report in your mind, and so you won’t miss these
details.
Usually, there are templates available in your company and you need to write the
report using these templates.
3. Target price
You need to mention the target price based on your valuation along with the
recommendation.
4. Investment rationale
Write clearly your investment rationale. Why do you think the share price will go
up/down?
Include a price chart of the stock that will show the last 52-weeks’ share price
movement.
6.Business model
Mention the analysis of the company’s business model and how will it perform in the
next 2-3 years.
Include important ratio analysis of the company and 52-week high-low share price on a
stock exchange.
Include market capitalization, Enterprise Value(EV), Earnings Before Interest Tax and
Depreciation (EBITDA), EV/EBITDA, and dividend yield (%)
8. Product profile and segments
Analyze the company’s product profile, its various segments, and brands. Include
current sales and forecasted revenue figures, cost, market size, company’s market
share, competition, the company’s performance in domestic and other markets.
Perform DCF analysis and relative valuation. Relative valuation should be done with
the company’s peers on the basis of Price-Earnings ratio (P/E), Price to Book ratio
(P/B), Price to Sales (P/S), Return on Equity (ROE) and Return on Capital Employed
(ROCE).
Write proper reasoning for your recommendation. For example—Why buy the stock or
why not to buy the stock. So, your reasoning has to be strong.
If the company is battling any case, write what could be its effects on the stock price.
While writing industry reports, write the points which are common for all players in
the industry, for example, regulatory limitation, excise duty, oil prices, etc.
While writing the equity research report, assume that the reader is new to the company
and he doesn’t have any idea about its business.
In short, as an equity research analyst, your equity analysis report writing process
should be structured and you should follow the dos and don’ts mentioned in this post.