In chapter 3, you learned how to write stock analyst ratings, recommendation, and summary and some important things to remember while writing equity research report.
Already, you’re ahead of the majority of analysts who want to write equity research reports.
But now that you know how to give stock analyst ratings and recommendations, you need to be able to write much better equity research report.
Chapter 4: Key Highlights and Company Profile
In this chapter, I will explain the importance of giving key highlights of the company and company profiling in an equity research report. It focuses on explaining how to give information about the company such as future strategies, strengths, weaknesses, etc.
Now that you are clear on the structure of the first page of the equity research report, let’s try to understand the other components of the equity research report.
As explained earlier, your investment rationale or recommendation will depend on the current position of the company, its past financial performance and its future strategy. So it’s very important for the analyst to cover all these three things in his report.
You can divide this section into three parts – a brief company profile, news updates, future strategy and a SWOT analysis on the company.
a. Brief Company Profile
First thing to do is to give a brief about the company.
Like a brief company profile. This should talk about a brief history of the company. Its manufacturing facilities, its products, its key markets, key customers, etc.
See the below example of a brief company profile:
Note how the analyst here has given a crisp profile about the company.
He has talked about the number of product categories, manufacturing facilities, its market presence in 170 countries, and key acquisitions.
b. News Updates on the Company
Next you can start by adding a few key points or news updates about the company.
Choose these news articles very carefully. You don’t want to make this a news paper, where we are reporting everything that happened in the time frame.
Report only those happenings that are significant and have been used by you to arrive at your investment rationale.
To collect these news articles:
- First scan the company’s website. Look at all the press releases the company has issued. Read the financial reports that the company has published or filed
- See if there are any interviews of key company personnel published in the financial media. Also check if there are any video interviews of company personnel available to watch/listen
- Also it is a good idea to talk to key company personnel personally, to get a perspective of the company’s strategy going ahead
Given below is an example of some key news about the company:
Note how the emphasis is on news which is directly impacting the performance of the company or is instrumental in helping the analyst male his investment rationale or recommendation.
c. Future Strategy of the Company
It is extremely important to provide intelligence on the future plans or future of the company.
The future valuations of the company, to a great extent, depend on the upcoming strategies of the company.
In fact this is one of the most important parts of the entire equity research report.
The better you understand the company’s future strategy, the better you will be able to predict its future valuation.
You can get this information by either reading the financial reports (especially the chairman’s speech) or by actually speaking to key personnel of the company.
Note that you won’t get all the strategies of the company as most might be confidential, but try to get a sense of what the company is planning for the future, how it is going to counter competition, plans on R&D, etc
Below is an example of future plans of a company:
Again note how the analyst has covered all the key future strategies of the company which will help him in forming his opinion about the company and giving his recommendation.
d. SWOT Analysis
It is always a good idea to give a SWOT analysis of the company.
SWOT Analysis is a useful technique for understanding the Strengths and Weaknesses of a company and for identifying both the Opportunities open to it and the Threats it faces.
Below is an example of SWOT analysis:
I hope you have understood this segment of the report.
Make sure you understand this section very well as it will help you, even when you are writing a company report or a company profile.
Now You Try It
I hope you understood how to write key highlights of the company and company profiles.
Yes, it takes hard work to create something great.
But with this skill you already know ahead of time that your hard work is going to pay off.
I want you to read various equity research reports to understand various styles and methods of company profiling.
At the same time, start working on writing reports.
If you have a question or thought, leave a comment below and I’ll get right to it.