Equity research is a powerful tool for investors. Investment firms employ analysts to perform in-depth research and analysis on companies, producing reports that explain current trends and projected performance. While smaller firms may only staff a couple of analysts to target specific industries, large firms can have thousands of analysts covering a wide range of companies and industries. These analysts are usually academics, former executives, or people with a long history in their industry. In the following sections, learn about the role equity research plays in guiding investment decisions.

Helps Investors Make Informed Investments

With so many businesses looking for investors and constantly changing market conditions, investors want to be careful about where they invest their money. Equity research provides investors with detailed information to help them make informed investments. Big investors don’t usually have time to dig deep into every single company they invest in–they rely on these reports to help inform their decisions, calculate risks, and hopefully get a good return on their investments.

Offers Professional and Objective Analyses of Investment Potential

Research reports generally disclose any connections with the company in question and the analyst preparing it, so investors will know how biased the report might be. Since analysts are experts in their field and have the time and resources to dive deep into these companies, investors can usually trust their analysis. Analysts compose these reports with current market conditions in mind, giving more optimistic projections to businesses operating in hot markets.

Makes Recommendations on Whether to Buy, Sell or Hold Stock

Equity research reports offer an overview of past and projected performance and make direct recommendations as to what to do with the company’s stock. If they’re projecting high growth, the analyst might recommend buying stock, whereas they might recommend selling if the industry is on a downward trend. Whether or not investors decide to follow these recommendations is up to them, and analysts can never guarantee their predictions, but they offer a great starting point.

Helps Generate Business Valuation

Another crucial role of equity research is providing business valuations. These valuations can be run on a couple of different models but usually either represent a company or asset’s inherent value or that value relative to another company or asset. These valuations are helpful for investors who need to know the worth of their investments and the businesses themselves.