Equity Research Vs Private Equity Side By Side Comparison

Equity Research vs Private Equity

Both the Equity Research profession and Private Equity may seem to run along the same lines, but there lies a vast difference between them. Equity Research is all about finding the valuation of the listed companies on stock exchanges, while Private equity research and analyzing the private companies and interpreting your results. This article will point out the major differences between both professions and make it simple for you to compare.

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What is Equity Research?

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 is a part of the investment banking sector and is meant for intellectual and qualitative students. As an equity research analyst, your role would include talking to the firm’s traders and brokers to discuss and share investment recommendations for clients. You would have to collect information and research on the companies you cover, perform financial statement analysis, and based on this research, you would prepare detailed equity reports along with complex financial models, relative valuations (like PE ratioPE RatioThe price to earnings (PE) ratio measures the relative value of the corporate stocks, i.e., whether it is undervalued or overvalued. It is calculated as the proportion of the current price per share to the earnings per share. read more, PBV ratioPBV RatioPrice to Book Value Ratio or P/B Ratio helps to identify stock opportunities in Financial companies, especially banks, and is used with other valuation tools like PE Ratio, PCF, EV/EBITDA. Price to Book Value Ratio = Price Per Share / Book Value Per Share read more, etc.), comparable compsComparable CompsComparable comps are nothing but identifying relative valuations like an expert to find the firm’s fair value. The comparable comp process starts with identifying the comparable companies, then selecting the right valuation tools, and finally preparing a table that can provide easy inferences about the fair valuation of the industry and the company.read more among others.

What is Private Equity?

A private equity analystPrivate Equity AnalystA private equity analyst is an analyst who looks for undervalued companies for a private equity investor to buy, take them private and earn profits. The companies are primarily unlisted, and the risk is higher.read more is a person who does research and analysis of private companies using financial modeling techniques. A private equity analyst acts as a support for Private Equity companies and trading groups by providing analytical and asset valuation support. The major focus is on recommending strategies for the highest return on investment and balancing the equity and debt instrumentsDebt InstrumentsDebt instruments provide finance for the company’s growth, investments, and future planning and agree to repay the same within the stipulated time. Long-term instruments include debentures, bonds, GDRs from foreign investors. Short-term instruments include working capital loans, short-term loans.read more. List of top private equity companiesTop Private Equity CompaniesPrivate equity firms are investment managers who invest in many corporations’ private equities using various strategies such as leveraged buyouts, growth capital, and venture capital. The top private equity firms include Apollo Global Management LLC, Blackstone Group LP, Carlyle Group, and KKR & Company LP.read more

Pre-Requisites to the career

Usually, CAs and MBAs are the top choices of recruiters for the position of equity research analyst, but it is not mandatory to have a commerce background. You have to master your analytical and quantitative skills and should have a strong interest in financial marketsFinancial MarketsThe term “financial market” refers to the marketplace where activities such as the creation and trading of various financial assets such as bonds, stocks, commodities, currencies, and derivatives take place. It provides a platform for sellers and buyers to interact and trade at a price determined by market forces.read more, accounting, and economics. You should also possess excellent communication skills and be well-versed in English. For pursuing a career in Private Equity, a background in commerceCommerceCommerce is the accumulation of several transactions for a given industry. A transaction is a one-time event where an entity exchanges anything of value with a different entity.read more and finance is recommended. It would be best if you were an MBA and should have a skill set for handling multiple tasks, logical reasoning, and analytical reasoning. Candidates with excellent verbal and written communication skills are preferred. Have a look at this article – Can an engineer get into investment bankingInvestment BankingTo get into investment banking, know where to begin with, understand how investment banks recruit, master investment and technical banking skills, and work on your soft skills along with the required degree and knowledge.read more.

Equity Research vs. Private Equity – Employment Outlook

Basic job roles that are a part of the 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 are:

Trainee: The first step towards a career in Equity ResearchCareer In Equity ResearchAn Analyst working in the equity research department is responsible for preparing various valuation research reports and financial models which is essential for the stakeholders. Equity research entails following job opportunities: 1.Makret Research Analyst 2.Sector Research Specialist 3.Senior Equity research Analyst 4.Fund Manager 5.Chief Investment Officerread more is a trainee in a company. It teaches you the necessary skills required for stepping in the shoes of an Associate. Training can be of any period between 6 months and one year. And generally involves workshops, case studies, and lectures.Associate: Trainees with experience of 1 or 2 years are hired as Associates. Associate equity research analystsEquity Research AnalystsAn equity research analyst is a qualified professional who interprets financial information and trends of an organization or industry to provide recommendations, opinions, reports, and projections on the corporate stocks to facilitate equity trading.read more provide written reports and company opinions to the sales department of the firm.Senior Analyst: Senior analyst is a reputed position to acquire. You would accompany the company’s CEO on his tours and advise him on particular matters.

Generally, a candidate works as an associate for three years and works as a senior analyst for several years before being promoted to the position of Vice President.

Along similar lines, career progression in the field of Private EquityField Of Private EquityPrivate equity (PE) refers to a financing approach where companies acquire funds from firms or accredited investors instead of stock marketsread more involves the following designations:

Analysts: As an Analyst, you would support your team members, and your major focus will be on financial modelingFinancial ModelingFinancial modeling refers to the use of excel-based models to reflect a company’s projected financial performance. Such models represent the financial situation by taking into account risks and future assumptions, which are critical for making significant decisions in the future, such as raising capital or valuing a business, and interpreting their impact.read more and developing your analytical skills. You must be an Analyst for two years before being promoted to an associate position.Associates: Experience of 2 or more years in a PE firm would make you suitable for this position. It requires three years of experience as an associate before applying for an associate director position. You would review applications, support your team members in negotiation and execution, and build a contact network to help the firm.Associate Director: minimum experience of 4 to 5 years is compulsory for an associate director. You would be an essential part of larger transactions and confine yourself to mid-market transactions as an associate director.Investment Director: Only those candidates who are highly experienced are selected for this position. As an Investment Director, you would play a crucial role in fundraising and making strategic decisions for the company.

Equity Research vs. Private Equity – Compensation

Talking about your career in equity research, your earnings as a junior analyst would range somewhere between $45,000 and $50,000 annually. After or promotion as an associate, your basic pay will be $65,000 and range up to $90,000 based on your performance and experience. As a senior analyst, a basic compensation of $125,000 to $250,000 will be provided, and you can earn a hefty amount from the bonus, which can be 2-5 times the base compensation.

While speaking of a career in private equity, the pay scale ranges from $40,000 to $100,000 a year. Apart from basic remuneration, additional benefits like bonuses and other payments can get you good money.

Equity Research vs Private Equity – Pros & Cons

As a candidate pursuing your career in the field of equity research, pros and cons in your career aspects will be:

Pros

Good salaryAmple of exit options and opportunities to workStable working hours

Cons

Desk-bound jobLonger durations of seating in front of the computerInterdepartmental pressure

In the field of Private equity, your career-related pros and cons would include the following:

Convenient working hoursGood salaryAmple of knowledge to gain
In-depth study of thingsNot much recognition as compared to other fields

What to Choose?

After reading the detailed analysis of both professions, it becomes clear that both options can earn you well and give you monetary benefits. While pursuing a career in equity research can bring you into the limelight, as an aspirant of the private equity sector, you would have to compromise on the limelight factor. Private equity jobs can provide you with valuable experience, which you can use if you decide to foray into other sectors later. 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 are for those who have a strong liking towards finance and financial analysis. The decision to choose anyone from the given options is extremely difficult as both the jobs can take your career to different heights.

Equity Research Vs Private Equity Side By Side Comparison