May sound trivial but i diden't attend a good business school and then i don't know nobody, there could be similar post but i think no recent ones.
what are the most fomous model that a equity research or equity analyst use for evaluate a stock??
which book teach just the financial model for equity research??
Thank you very much
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Every business is different and every company is different. There is no cookie cutter model that all Equity Research Analysts use. That's the beauty of it. Every analyst builds a model that tries to shows the best representation of the future earnings/cash flow/balance sheet of a firm.
You can do a financial modelling crash course (I like factset) and then read Rosenbaum's book to get the theory/thinking part. Most of the time, analysts build the models and the new guys update them for a while before getting their own coverage. So if you're new to the field then you have some time to learn before you're expected to run on your own.
You can try contacting some analysts in the vertical you'd be in. See if they'd give any insight, even if it's unlikely they're going to give you much information since you may be part of their competition. You could also try building your own model and then asking people what their input is....it shows interest and humility.
Thank you for your reply, anyway I have already read the book Rosenbaum but as has already said it is very theoretical, I'd like to find something that from a template you can get a price of stock. However, the models are those that explains in rosembault righ?, if a read also "a guide for equity research" can have a full blackground?
We use an abacus over here
"now, if I just move this little rock over here...ah yes, I have achieved finance."
Good God.
My firm uses a DCF model only. It's a theoretically accurate model with practical value. How good are you in Excel?
DCF and public comps on sales, ebit, or ebitda are common
For equity research, DCF is common, and it could be your startpoint
Thank you very much guys especially for those that have responded with practical examples, i'm good with excel but for you what does it mean good?? which functions i have to be able to do?
You need to be able to use almost every financial function along with IF, TREND and the basic statistics functions. Ensure that you understand PF, FV, RATE, NPER, NPV and IRR/MIRR completely.
Thank you again ;) you are very useful giving practical example Thank you
Question on Modeling for ER (Originally Posted: 10/10/2010)
Model historical and projected financial statements including detailed cash flow and ratio analysis.
Can someone please elaborate on this.
what does "modeling historical and projected financial statements" mean? can you point me in the right direction?
Cash flow analysis = DCF analysis?
Basically if this is a public company, pull the historical financials on it and spread it. Then, based on the company's sector come up with growth rates for things like sales, COGS, D&A, etc. This will let you project out its financial for several years.
When you project all of this out, then you can project the FCF for that company.
Ratio analysis is just credit stats...good luck!
If this is a private company and you don't have any data, then you're fucked...
so that was the answer to question 1? Why did you say good luck after ratio analysis? And is "cash flow analysis" the same thing as DCF?
Ratio analysis consists of things like P/E, EPS, PEG
like the first poster said... you basically enter their financial statements in excel, project them into the future using some type of reasoning... doesn't necessarily have to be arbitrary growth rates (though I've seen my fair share of these).
The value in sell side ER, in my opinion, is the relationships the coverage teams have with the companies themselves... they know what each contract looks like and thus have knowledge of (if it's a mftg company, for example) what future bookings will be. so they can project sales, margins, etc 'better' than the layman. \ The other advantage is they have really thorough on any regulation in the industry, and actually have built small excel templates predicting the effects of certain regulatory scenarios.
I haven't seen any DCFs used in practice... just FCF... which again, are projected by using data regarding backlog, statements from C-level execs, and really, sometimes, complete bs %s (opinions)...
What do you think ratio analysis is? ratios current cash debt-to-equity coverage ratio, inventory turnover ratio, etc...
by the way... why would this be for a 'private company'... it's EQUITY research?
Ratio Analysis
If it it the income statement - analysts usually like to see Revenue growth YOY etc Balance sheet - Liquidity and Solvency Ratios.
PM me - I have a sample model that might help you.
ok I got ratio analysis down.
so cash flow analysis is not DCF analysis?
ugh, what is the ER equivalent to "Investment Banking by Joshua Pearl and Rosenbaum" are any of these good?
http://www.amazon.com/Equity-Valuation-Leading-Investment-Finance/dp/04…
http://www.amazon.com/Writing-Securities-Research-Practice-Guide/dp/047…
http://www.amazon.com/Best-Practices-Equity-Research-Analysts/dp/007173…
go die.....
no one actually buys WSP, it's all pirated copies /2nd hand versions
when you say enter FS and "spread it," what does this mean?
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