Who is an Equity Research Analyst?

Explanation

  • The primary role of an Equity research analystResearch AnalystResearch analyst is a profession where the main task includes research on specific fields, analyzing the facts and figures, interpreting the analysis, and finally presenting the same to a structured audience that can relate to marketing, finance, operations.read more is to recommend buying, selling, or holding any financial securities. They prepare a report based on the financial statement of a company. They analyze costing, revenue, risk in the company. An analyst also keeps track of various activities in a company like an industrial seminar, investor day event, investor meeting.They gather all information and analysis to build a financial model. These models are used to find the value of a company and analyze its financial position; it is based on some assumptions. It helps to predict the future financial performance of the country.  An output of the model has the recommendation to buy, sell, or hold with a potential return from the current price. Assumptions made differ from analyst to analyst, and every analyst has a different specification.

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Classification

Equity research analysts can be classified as follow:-

#1 – Buy Side

In buy-side companies have research analysts to help them with investment purposes. They monitor the securities daily and access the impact of macroeconomic news on the long-term performance of the stocks. Additionally, they are in touch with the sell-side research analyst for stock advice and updates.

#2 – Sell-Side

The analysis is done to advise the client on the current investment opportunities on the sell-side. They analyze equities to recommend buying or selling particular financial security. These tips are provided to the agent or relationship manager of a brokerage firm and bank in the form of reports prepared by the research analyst.

Equity Research Analyst Career

Equity Research careerEquity Research CareerEquity research comprises an individual’s expertise in researching, reporting, projections, and predictions surrounding a company’s stock. The top five careers in equity research are - Market research analyst, Sector research analyst, Senior equity research analyst, Fund manager, and Chief investment officer. read more starts as a junior analyst and then moves to the Equity Associates roles.

  • As a junior analyst, you are responsible for almost everything, including data entry jobs and preparing the companies’ financial model. Your main role is to support the Associate in his daily tasks.The associate manages either one or maybe two to three junior analysts and ensures the timely completion of the results updates, financial models, equity research reports for the senior analyst. The Senior Analyst role is mostly client-facing, wherein they are expected to call and meet the fund managers and regularly communicate about their investment thesis and its rationale.

Qualifications

The key here is to be able to work well under pressure. You should be good at research and analytical stuff. For a Junior equity research analyst, a bachelor’s degree in accounting may be sufficient. However, you should be able to demonstrate your passion for finance. Taking CFA examsTaking CFA ExamsThe Chartered Financial Analyst (CFA®) Program offers a graduate-level curriculum and examination program designed to expand your working knowledge and practical skills related to investment decision-making. read more is one plus.

What is expected from an Equity Research Analyst?

#1 – You should be awesome in Financial analysis

As an analyst, you are expected to be excellent in financial ratio analysis. You should be able to fully understand and analyze the SEC filingsSEC FilingsSEC filings are formal documents submitted to the Securities and Exchange Commission in the United States that contain financial information about the company as well as any other relevant information about recent or upcoming activities.read more and present those in excel.

#2 – Excellent Communication Skills

It is important to have great communication and writing skills. Equity Analysts are expected to publish their investment reports at frequent intervals, and they should be able to communicate well with their clients.

# 3 – Awesome in Financial Modeling

Financial modeling involves forecasting the company’s financials and estimating the fair value using DCF ValuationDCF ValuationDiscounted cash flow analysis is a method of analyzing the present value of a company, investment, or cash flow by adjusting future cash flows to the time value of money. This analysis assesses the present fair value of assets, projects, or companies by taking into account many factors such as inflation, risk, and cost of capital, as well as analyzing the company’s future performance.read more, trading multiple valuationsTrading Multiple ValuationsWhen a company is being valued, sometimes all the values essential for a discounted cash flow valuation is not available, and hence it is imperative for the analyst to take a comparative company, find out the multiple of financial values and use them in our analysis to find the proper metric are called trading multiples.read more and other valuation tools. As an Equity analyst, be prepared to be awesome in financial modeling.

#4 – You should be Great at Excel

Mostly, you will work under intense pressure with deadlines, especially during earning seasonsEarning SeasonsThe Earnings season refers to the quarterly report of companies’ results, such as revenue/profits, released in the first two weeks after each quarter ends (Dec, Mar, Jun, Sep). It helps investors in making investment decisions and determining the value of their investments.read more (quarterly and annual result announcements. Clients expect you to come up with the analysis quickly and accurately. Therefore, you must take every measure to save time. Equity Analysts are experts at excel, and they can pull reports and prepare financial models and charts in no time.

Who provides equity research analyst Jobs?

These analysts are hired in the following sectors –

  • Stock BrokerageMutual FundsWealth Management FirmsBanksKPO’sCredit Rating FirmsMedia CompaniesDataBase Firms

Equity Research Analyst Exit Opportunities.

As discussed earlier, you may work as a sell-side equity research analyst for a couple of years, get promoted as an associate, and move up the chain. However, if you have decided to quit equity research, the following options may be open for you –

# 1 – Get into Buy-Side Roles

Here you would be basically working for the hedge fund managers or the portfolio managersThe Portfolio ManagersA portfolio manager is a financial market expert who strategically designs investment portfolios.read more. The skillset for both is similar as you analyze investments and make recommendations. The buy-side offers an even better lifestyle and investing.

#2 – Get into Investment Banking

Many research analysts move into Investment Banking rolesInvestment Banking RolesInvestment bankers play diverse roles and responsibilities in a company as analysts, associates, vice president and managing director. They handle the front, middle, and back-office responsibilities to cater to the clients with all sort of financial services.read more like IPO, M&A, etc. Most of the skills required for Investment Banking are the same as that of equity researchEquity ResearchEquity Research refers to the study of a business, i.e., analyzing a company’s financials, performing Ratio Analysis, Financial forecasting in Excel (Financial Modeling), & exploring scenarios to make insightful BUY/HOLD/SELL stock investment recommendations. Moreover, the Equity Research Analysts discuss their findings & details in the Equity Research Reports. read more and offer a lucrative career due to its dynamic nature.

#3 – Get into Private Equity

Getting into private equity could be another exit option. However, this can get tough as you are not working on transactions at equity research jobsEquity Research JobsEquity research analysts jobs are competent for the candidates who have a keen interest and understanding in financial analysis of the companies. The profile includes suggesting equities as well as buying and selling the stocks on the clients’ behalf.read more and hence the profile differs a bit. That does not mean it is impossible to get into PE.  As a research analyst, you would be well versed with investment researchWith Investment ResearchInvestment research entails analyzing the performance of various financial instruments such as stocks, mutual funds, bonds, debentures, and so on in order to present an investor with a view of how the firm is performing. It also aids in predicting their future performance for price movements.read more only that this will be respect to private companies and not public.

This article is a guide to Equity Research Analysts. Here we discuss equity research analysts’ classification, roles and responsibilities, qualifications, and exit opportunities. You can learn more about Equity Research from the following articles –

  • Equity Research Interview QuestionsGet Into Equity ResearchTop Skills required for Equity Research