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What To Look For In A Stock Research Report

02 Sep 2022 0 COMMENT
  • Start with looking for basic information
  • Don’t miss information about valuation and financials
  • Look for commentary on the company’s future prospects
  • It usually also contains information about peers
  • Look for possible risk factors to assess the suitability

“Never invest in a business you cannot understand,” goes one of the famous quotes by Warren Buffett. You cannot understand a business and its true potential without doing proper research. Considering the vast number of companies listed on the stock exchanges, it is impossible for investors to research them individual.

In this scenario, research reports published by financial institutions, including brokerage firms, come handy. This is because research reports are prepared by research analysts who are professionally qualified to do this.

Here is what research reports contain and how you can use them to make informed investment decisions.

Basic Information

Typically, a research report begins with some basic information about the company. This includes the company name, its ticker symbol, the primary sector and industry in which it operates, the current stock price, market capitalization and so on.

These reports also contain the financial institutions’ investment recommendation on whether you should buy, hold or sell the stock of the company.

But the key thing to see here is the target stock price. This gives you an idea about how the stock price will move in the future. For instance, if it is a buy call, the target price would be higher than the current price. On similar lines, if it is a sell recommendation, the report will suggest you a target price that is lower than the current price, indicating that the stock is likely to fall in the future.

These recommendations are based on through analysis of company financials using various models, sector outlook and market trends.

Industry Overview

This section of the report includes an overview of the industry dynamics, including a competitive analysis of the industry.

Most research reports carry the overall industry trends and discuss the competitive environment, including the performance of the peers. For instance, a research report of a company working in the Information Technology space will give you an idea about how the company is seeing an increased demand for “as-a-service” model, and how digital, cloud and transformation programs continue to have robust demand as clients spend on value initiatives. This part may also contain the commentary given by the management for future growth.

Valuation And Financial Analysis

The valuation section includes a thorough valuation analysis of the company using conventional valuation metrics and formulas. This gives you an idea about the company valuation in relative terms compared to its peers in the industry.

The financial analysis section gives you detailed analysis of the company’s historical financial performance and a forecast of future performance. This section is mostly represented by charts and graphs for better understanding of the readers. With the help of all these pictorial representation you get to know the companies past and likely future performance.  

Investments Risks

This section addresses potential factors or causes that could pose a risk to the investment thesis given in the report. These risks could be of any type such as  operational or financial or related to regulatory issues or legal proceedings.

Research reports give you a broad perspective about the company. You should prefer research reports that come from reliable sources and those that contain actionable.

Disclaimer: ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400025, India, Tel No:- 022 - 2288 2460, 022 - 2288 2470. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code:-07730) and BSE Ltd (Member Code :103) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism. Please note that Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. I-Sec does not assure that the fund's objective will be achieved. Please note. NAV of the schemes may go up or down depending upon the factors and forces affecting the securities markets. Information mentioned herein is not necessarily indicative of future results and may not necessarily provide a basis for comparison with other investments. Investors should consult their financial advisers if in doubt about whether the product is suitable for them. SEBI research analyst Registration no.-INH000000990. ICICI Securities Ltd. acts as a referral agent to ICICI Bank Ltd., ICICI Home Finance Company Limited and various other banks / NBFC for personal finance, housing related services etc. & the loan facility is subjective to fulfilment of eligibility criteria, terms and conditions etc