Institutional investors often invest funds with a specific investment mandate and for a specific period. An equity research service provider offers institutional investors impactful recommendations augmented by the power of information to enable them to invest funds in the equity markets. Since investment is inherently risky, proper investment backed by proper research and ably supported by a research team is essential for earning returns on investments.
What are equity research services?
Providing equity research services involves studying businesses and business environments in order to issue buy or sell decisions regarding equity shares. A purchase or sale of equity shares is based on information on the working of a company and potential future performance. An equity research analyst conducts a thorough analysis of the current status and growth prospects of a company and the industry in which it operates. This includes research on headwinds, tailwinds, financial statements, cash flow, management quality, market share and any other information that could be used to predict the performance of a company and, therefore, the price of its stock. Apart from relying on quantitative information, an equity research analyst may also obtain qualitative information about a company by interacting with its clients, vendors and employees.
Why is equity research important?
Equity markets are full of risk and are prone to volatility. They often behave in a random and volatile manner, which could concern investors. While institutional investors have a longer timeframe for investment, they also have a fiduciary duty towards the beneficiaries of the funds. Equity research service providers offer guidance and risk management services to this end.
Investment and trading are inherently risky. Through proper risk management, however, the risk-reward ratio may be enhanced and investors could earn higher returns at lower risk. Equity research services would allow for risk management and increase the chances of creating wealth over a longer period of time.
What does an equity analyst do?
The equity analyst conducts research on a company, the industry it operates in and related reports to gain an understanding, and issues a report on his valuation of the company. An equity analyst is often part of an investment bank and may either work on the buy side or sell side, and conduct analysis accordingly.
What does an equity research report consist of?
An equity research report’s format would depend on whether it is an initiation of the company or a follow-up. It generally begins with industry research and insights on the industry in which the company operates. A general overview of the company is followed by a management overview and the company’s financial reports for the past few quarters. Based on such past performance, the analyst may attempt to provide insight on the future performance of the company based on industry insight and management commentary.
The final part of the equity research report generally consists of the valuation of the company and the price of an equity share of the company based on such valuation. A timeframe may also be provided along with a target price, to enable investors to make a decision.
Conclusion:
Risk management is one of the most important aspects of any business activity regardless of the industry. Since equity analysis and movement of the share price are based on demand for and supply of a share along with information available on a company, equity research services enable investors and those who seek such services to adopt proper risk management techniques and take advantage of information gaps that may exist in the market.
