Equity Research Report Format + Example PDF

A company’s Board of Directors would never approve of an acquisition solely because of a merger model’s output. The goal is to assess whether a larger company’s acquisition of a smaller company provides a financial benefit. For example, if similar companies are worth 3x their annual revenue, and your company has revenue of $200 financial modeling for equity research million, perhaps it should be worth about $600 million. The Cash Flow Statement provides a reconciliation between a company’s Net Income and the cash it generates, which is often quite different. But if the model tells you that the company is undervalued by 90% or overvalued by 200%, those are much more useful results.

If the employee has one or two years of experience, the employer needs sensitized analytical abilities and the application of logic in creating ratio analysis, income statement, and balance sheet, in addition to the foregoing. Candidates must have a basic understanding of financial modeling, report writing abilities, and proficiency in both written and spoken English. An Equity Research Analyst is a professional in the financial security sector, often known as the securities industry. An equities analyst provides services to both investment businesses (buy-side) and individuals or brokerage firms (sell-side) that sell products to the buy-side.

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. For this reason, a financial model may be sent to an outside party to validate the information it contains.


So, for example, you would sum up (hence “sum of the parts”) the value of business unit A, business unit B, and investments C, minus liabilities D to arrive at the Net Asset Value for the company. In this section, the cash flows that were calculated above are being discounted by the calculated WACC. If you’d like to have the templates, you can always download our financial models. Barring a new company initiation or an unexpected event, equity research reports tend to immediately precede and follow a company’s quarterly earnings announcements.

  • The required equity research analyst abilities are determined by an individual’s level of expertise in the area.
  • 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.
  • Because most industries demand a high level of specialized knowledge, it makes sense for an analyst to focus on one field in which they may become specialists.
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And then in roles outside of ER, you need to know how to interpret reports quickly and extract the key information. 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. Thanks, but unfortunately we don’t have a Word template as these research reports have additional built-in functionality (charts, legal disclosures, etc). Use the form below to download a research report from JP Morgan by the analyst covering Hulu.

Your Sample Equity Research Reports

The two main types of option pricing models are binomial tree and Black-Scholes. These models are based purely on mathematical formulas rather than subjective criteria and, therefore, are more or less a straightforward calculator built into Excel. This type of model includes multiple business units added into one single model. Typically, each business unit has its own tab, with a consolidation tab that simply sums up the other business units. This is similar to a Sum of the Parts exercise where Division A and Division B are added together and a new, consolidated worksheet is created. In this tutorial, we’re focusing on the “Company Update” or “Company Note”-type reports, which are the most common ones.

Equity Research Reports: Myth vs. Reality

Financial models are used to estimate the valuation of a business or to compare businesses to their peers in the industry. They also are used in strategic planning to test various scenarios, calculate the cost of new projects, decide on budgets, and allocate corporate resources. Recruiting in equities research is more haphazard and unstructured than in investment banking. Although the major banks perform some undergraduate and MBA-level recruitment, many of their positions are filled on an “as required” basis. Equity research internships do exist, but they differ from IB and S&T internships in that they do not always lead to full-time offers.

How to Learn Financial Modeling: Free Tutorials

The section of an investment bank responsible for creating analysis, reports, and recommendations to purchase, hold, or sell investment possibilities that the bank or their customers may be contemplating is known as equity research. But the best way to mastery this technical knowledge is to learn and practice financial modeling. It’s the difference between passively listening to a foreign language and actively practicing by speaking and writing in that language. You do not need to know financial modeling “perfectly” for entry-level interviews and internships, but you do need a solid base of technical knowledge to be competitive. However, you rarely do “financial modeling” at the senior levels in these fields.

This type is also used in financial planning and analysis (FP&A) to build a forecast that compares to the budget model. Sometimes the budget and forecast models are one combined workbook and sometimes they are totally separate. Get a crash course on accounting, 3-statement modeling, valuation, and M&A and LBO modeling with 10+ global case studies. Each bank has their own set of recommendations (terms) they use to rate a stock. Upgrading to a paid membership gives you access to our extensive collection of plug-and-play Templates designed to power your performance—as well as CFI’s full course catalog and accredited Certification Programs. Each business is unique and requires a very specific set of assumptions and calculations.

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Analysts are typically classified into industry sectors to cover firms that are comparable within an industry. Because most industries demand a high level of specialized knowledge, it makes sense for an analyst to focus on one field in which they may become specialists. An early-stage startup does not have cash flows to model, and the founder’s personality and drive matter more than any spreadsheet. Financial modeling matters less for the direct benefit and more for the indirect benefit of mastering the accounting, valuation, and transaction analysis concepts that you’ll be asked about in interviews.

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. 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.

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This is why Equity Research Reports frequently include “Buy” recommendations and seldom, if ever, include “Sell” ratings. You should try reading as much as possible about fundamental analysis and ratio analysis in the days leading up to the interview. As a result, you must demonstrate to the interviewers that your knowledge foundation is solid in these areas. If you have no interest in working at these firms and you just want quick tips and tricks, these courses are not appropriate for you. For example, with oil & gas companies, the Net Asset Value (NAV) model is a variation of the traditional DCF analysis that does not have a Terminal Value – because oil & gas assets have limited economic lives. In project finance and infrastructure, the projections are often based on individual contracts as well – and there may be hundreds or thousands of them.

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