Equity Research Techniques & Concepts – Valuation Methods

What is Equity Research Analysts do;

Equity research analysts analyze companies in order to find possible investments.  Sell-side equity research is when these analysts provide their research to clients.  Buy-side equity research is when the analysts do their own research to invest their firm's money (e.g. mutual funds, hedge funds).

What are the various ways of doing equity research? 

There are various ways in which you can valuate the worth of any of your stock. What are these ways an dhow to go about them. Lets take a look.

• Stock Valuation –  How much is a share of stock really worth? Not just in terms of analysts' opinions, but logically, based on facts? In theory, the answer is simple: a company is worth the total amount of cash it will generate over its lifetime, discounted to its present value. This article presents a simple discounted cash flows calculator, along with some popular variations and shortcuts, to make stock valuation make sense. The author however sounds a note of caution before he starts the article, “When you use any kind of value formula, it's a good idea to remember Warren Buffett's advice, that "it's far better to buy a wonderful company at a fair price than a fair company at a wonderful price". The idea is to find a company whose prospects you really believe in, and then use a valuation technique as a reality check, to make sure the purchase price is acceptable. And try to make your valuation estimates realistic and conservative: you're trying to protect yourself from overpaying, not justify your surplus of enthusiasm. “ Interesting and useful resource, from Money Chimp

• Business Valuation Methods –  The corporate landscape has witnessed dynamic changes in the recent years as mergers and acquisitions, corporate restructurings, and share repurchases are happening in record numbers, both in the United States and abroad. At the core of the dynamics of all these activities stands some notion of valuation. The valuation methods are not only necessary for accounting purposes but they also serve as roadmaps for the angel investors, venture capitalists and corporate acquirers in order to know the true value of a company’s assets. This page discusses four standard business valuation approaches: Asset Accumulation, Discounted Cash Flow, Market Value, Price Earnings Multiple Valuation – from Second Venture Corporation