About Equity
What is equity research: it primarily means analyzing company’s financials, perform ratio analysis, forecast the financials (financial modeling) and explore scenarios with an objective of making BUY/SELL stock investment recommendation. Equity Research analyst discuss their research and analysis in their equity research reports.
The research report is used by
investment banks and private equity firms to evaluate the company for IPO, LBO,
mergers and others.
The function of the equity researcher
is to present a detailed analysis of a company, enabling investors to make an
informed decision.
Typically an equity research department is split into different coverage groups. These coverage groups will be small teams and they will focus on a specific sector (i.e. mining, energy & resources, healthcare, consumer etc.). Each team will usually cover 5-20 companies
Equity Research : Major criteria of
selection:
1.
Promoters Backgrounds:
promoter is an individual or
organization that helps raise money for some type of investment activity.
Promoters may raise money for a company by offering investment vehicles other than traditional stocks and bonds, such as limited partnerships and direct investment
activities.
2. business models
or business overview:-
A business model describes the rationale of how an organization creates,
delivers, and captures value, in
economic, social, cultural or other contexts. The process of business model
construction is part of business
strategy.
In theory and practice,
the term business model is used for a broad range of informal and formal descriptions to represent core aspects of a business, including
purpose, business process, target customers, offerings, strategies,
infrastructure, organizational structures, sourcing, trading practices, and operational processes and
policies including culture.
3.
Share Holding Pattern:
In simple words shareholding pattern shows the
number of shares which are held by various category of investors. Companies
equity comprises 100 percent out of this certain percentage is hold by
promoters and rest by outside parties like retail, FII and so on. Shareholding
pattern shows exact percentage and amount of shares hold by various people in
the market and therefore it can be of great help because before investing into
any stock you would like to see whether promoter and big players are increasing
or decreasing their stake in the company and therefore it helps in better
investment decisions.
4. Debt/Equity
Ratio:
Debt/Equity Ratio is a debt ratio used
to measure a company's financial leverage, calculated by dividing a company’s total liabilities by
its stockholders' equity. The D/E ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in
shareholders’ equity.
the formula for calculating D/E ratios can be represented
in the following way:
Debt/ Equity Ratio = Total Liabilities
/ Shareholders' Equity
5.Government policies : A plan or course of action, as of a government, political party, or business, intended to influence and determine decisions, actions, and other matters:
Governments create the rules and
frameworks in which businesses are able to compete against each other. From
time to time the government will change these rules and frameworks forcing
businesses to change the way they operate. Business is thus keenly affected by
government policy.
6. Sales
Growth / Net profit
The increase in sales over a specific period of time, often but not
necessarily annually.
Often referred to as the bottom line, net profit is calculated by subtracting
a company's total expenses from total revenue, thus showing what
the company has earned (or lost) in a given period of time (usually one
year). also called net income or net earnings
net profit is the money left over after
paying all the expenses of an endeavor. In practice this can get very complex
in large organizations or endeavors. The bookkeeper or accountant must itemise
and allocate revenues and expenses properly to the specific working scope and
context in which the term is applied.
7.
.Branding
:
The process involved in creating a unique
name and image for a product in the consumers' mind, mainly through advertising
campaigns with a consistent theme. Branding aims to establish a significant and
differentiated presence in the market that attracts and retains loyal
customers.
Branding is also a way to build an important company asset, which
is a good reputation. Whether a company has no reputation, or a less than
stellar reputation, branding can help change that. Branding can build an
expectation about the company services or products, and can encourage the
company to maintain that expectation, or exceed them, bringing better products and
service to market places.
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