How to Conduct Company Research for Investment?
March 06, 2023
There are many possible reasons for researching a company. Job applicants might research potential employers to prepare for the interview process. On the other side of the process, the hiring manager of the potential employer might research companies that are competitors for the same talent.
In this article, we will discuss how to research a company with another goal in mind - investment decisions. In this field, company, and market research could drive the most profitable choices.
Types of information needed for researching a company
Any investment analysis is built on information. Researching a company for investment involves leveraging various types of data. Firstly, there is, of course, traditional financial information like the company’s funding, revenue, and assets.
This type of information should be supplemented by alternative data on the company’s growth trends. For example, changes in online job postings or headcount data might indicate the firm’s growth or decline. Meanwhile, technographic data provides insight into how well the company adjusts to the fast-paced technological development.
Information about the key employees of the company is also crucial and ranges from contact and professional to leisure and interest data.
Finally, effective company and market research involves news data analysis. This includes company reviews and other direct mentions, as well as market events and industry trends that could affect the firm.
How to conduct effective company research?
Identify the company
The first step is, of course, identifying the object of our analysis. Thus, researching a company starts with finding out its defining features, for example, whether it is a public or private company. Public companies are easier to investigate as they are traceable by a ticker symbol and are required to disclose financial information. Other key identifiers of the company are its industry, market share, and where it is registered.
Clarify research questions
Research is effective when it has clearly defined goals. Think about what sort of questions need to be answered for you to be able to reach an investment decision about a specific company. Naturally, the main questions will revolve around the company’s products, services, sales, growth trends, management capabilities, and financial health.
Determine which sources are reliable and relevant
You are going to need a lot of data to answer the questions that you have raised. Thus, when choosing data sources, consider what information is relevant to your goals. If you seek to know more about company culture, for example, employer review sites are what you need.
The source should also be reliable. Financial data can come from the company’s annual reports and publicly available governmental sources. Meanwhile, market news should only be retrieved from trusted media outlets. Relevancy and reliability are the most important factors when choosing a third-party data provider.
Utilize data gathering and analysis tools
Finally, you will need to use the right tools to do the company analysis efficiently. While a manual google search or review of the company website might get you started, it won’t take you all the way.
Aggregating business news and analyzing public sentiment will require considerable automation. Below you will find more information on the tools and resources to use when researching companies.
Essential tools and resources for gathering information
Public companies operating in the US are required to file accounting and other reports with the Securities and Exchange Commission (SEC). You can use its Electronic Data Gathering and Retrieval (EDGAR) tool to search SEC filings.
EDGAR allows you to search for keywords in various documents describing everything from the company’s historical performance to current business operations and acquisitions. Thus, when it comes to traditional business data, EDGAR is certainly your friend.
When it comes to alternative data, Coresignal is the right place to be. Consider trying our APIs which allow searching for multiple data points and retrieve what you need immediately. The APIs will fetch you everything from general firmographics to in-depth information about the company’s employees.
Library of congress provides multiple subscription-based tools that optimize company research for investment purposes. For example, Mergent Online archives past and present company information that can be searched by financial and textual criteria.
Meanwhile, Factiva holds premium business publications in 26 languages and from 200 countries all over the world. The complete list of subscription tools as well as the complete guide on how to access and use them can be found on the Library’s website.
Linkedin and other social media websites
When considering investing in a business, you want to know what kind of person or persons are running it, what they are interested in, who they network with, and other information found on social media profiles might make you aware of red flags that would otherwise be missed.
Linkedin is the leading social network where prospects on a job search gather information about a potential employer. It might just as well be used to research a company for investment decision-making. In addition to people’s data, social media pages are sources for public company reviews.
How to apply the gathered information to investment decisions?
Using the analysis results for investment decisions is all about putting it in the context of market trends and the competitive landscape faced by the business. Thus, your findings should be leveraged against the knowledge acquired by deeper market research into similar products and services.
First, look at the detailed information about the company’s performance and financial stance. If everything seems to be good there, check for red flags. News about the company and reviews by employees and customers will be the most useful for this purpose. Information from the news and social media websites will also help when considering market trends that will affect the business in question.
The final step of the analysis is scrutinizing every publicly available information about the key decision-makers in the company of interest. Insights from their online presence should supplement data on their department, role in the organization, and expertise.
The importance of company research
Investors need to research a company thoroughly before making their decision. Otherwise, they would have to pay not only the price of a bad investment but also that of a lost opportunity to invest in a better business. Only a deep analysis of the organization, its competitors, and industry conditions will give a good idea of its value.
Additionally, researching a company for its business model and the people that are involved has potential long-term benefits. The knowledge acquired might be used in deciding upon future opportunities when the same people or a similar business is encountered.
Thus, researching businesses is the smart thing to do before arriving at any important investment decision.
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