Equity Research vs Private Equity

Article byWallstreetmojo Team
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

Equity Research vs Private Equity

Both the Equity Research profession and Private Equity may seem to run along the same lines, but there lies a vast difference between them. Equity Research is all about finding the valuation of the listed companies on stock exchanges, while Private equity research and analyzing the private companies and interpreting your results. This article will point out the major differences between both professions and make it simple for you to compare.

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What is Equity Research?


Equity ResearchEquity ResearchEquity Research refers to the study of a business, i.e., analyzing a company's financials, performing Ratio Analysis, Financial forecasting in Excel (Financial Modeling), & exploring scenarios to make insightful BUY/HOLD/SELL stock investment recommendations. Moreover, the Equity Research Analysts discuss their findings & details in the Equity Research Reports. read more  is a part of the investment banking sector and is meant for intellectual and qualitative students. As an equity research analyst, your role would include talking to the firm’s traders and brokers to discuss and share investment recommendations for clients. You would have to collect information and research on the companies you cover, perform financial statement analysis, and based on this research, you would prepare detailed equity reports along with complex financial models, relative valuations (like PE ratioPE RatioThe price to earnings (PE) ratio measures the relative value of the corporate stocks, i.e., whether it is undervalued or overvalued. It is calculated as the proportion of the current price per share to the earnings per share. read more, PBV ratioPBV RatioPrice to Book Value Ratio or P/B Ratio helps to identify stock opportunities in Financial companies, especially banks, and is used with other valuation tools like PE Ratio, PCF, EV/EBITDA. Price to Book Value Ratio = Price Per Share / Book Value Per Share read more, etc.), comparable compsComparable CompsComparable comps are nothing but identifying relative valuations like an expert to find the firm's fair value. The comparable comp process starts with identifying the comparable companies, then selecting the right valuation tools, and finally preparing a table that can provide easy inferences about the fair valuation of the industry and the company.read more among others.

Video Explanation on Equity Research vs. Private Equity

 

What is Private Equity?


A private equity analystPrivate Equity AnalystA private equity analyst is an analyst who looks for undervalued companies for a private equity investor to buy, take them private and earn profits. The companies are primarily unlisted, and the risk is higher.read more is a person who does research and analysis of private companies using financial modeling techniques. A private equity analyst acts as a support for Private Equity companies and trading groups by providing analytical and asset valuation support. The major focus is on recommending strategies for the highest return on investment and balancing the equity and debt instrumentsDebt InstrumentsDebt instruments provide finance for the company's growth, investments, and future planning and agree to repay the same within the stipulated time. Long-term instruments include debentures, bonds, GDRs from foreign investors. Short-term instruments include working capital loans, short-term loans.read more. List of top private equity companiesTop Private Equity CompaniesPrivate equity firms are investment managers who invest in many corporations' private equities using various strategies such as leveraged buyouts, growth capital, and venture capital. The top private equity firms include Apollo Global Management LLC, Blackstone Group LP, Carlyle Group, and KKR & Company LP.read more

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Pre-Requisites to the career


Usually, CAs and MBAs are the top choices of recruiters for the position of equity research analyst, but it is not mandatory to have a commerce background. You have to master your analytical and quantitative skills and should have a strong interest in financial marketsFinancial MarketsThe term "financial market" refers to the marketplace where activities such as the creation and trading of various financial assets such as bonds, stocks, commodities, currencies, and derivatives take place. It provides a platform for sellers and buyers to interact and trade at a price determined by market forces.read more, accounting, and economics. You should also possess excellent communication skills and be well-versed in English. For pursuing a career in Private Equity, a background in commerceCommerceCommerce is the accumulation of several transactions for a given industry. A transaction is a one-time event where an entity exchanges anything of value with a different entity.read more and finance is recommended. It would be best if you were an MBA and should have a skill set for handling multiple tasks, logical reasoning, and analytical reasoning. Candidates with excellent verbal and written communication skills are preferred. Have a look at this article – Can an engineer get into investment bankingInvestment BankingTo get into investment banking, know where to begin with, understand how investment banks recruit, master investment and technical banking skills, and work on your soft skills along with the required degree and knowledge.read more.

Equity Research vs. Private Equity – Employment Outlook


Basic job roles that are a part of the Equity research careerEquity Research CareerEquity research comprises an individual's expertise in researching, reporting, projections, and predictions surrounding a company's stock. The top five careers in equity research are - Market research analyst, Sector research analyst, Senior equity research analyst, Fund manager, and Chief investment officer. read more are:

Generally, a candidate works as an associate for three years and works as a senior analyst for several years before being promoted to the position of Vice President.

Along similar lines, career progression in the field of Private EquityField Of Private EquityPrivate equity (PE) refers to a financing approach where companies acquire funds from firms or accredited investors instead of stock marketsread more involves the following designations:

Equity Research vs. Private Equity – Compensation


Talking about your career in equity research, your earnings as a junior analyst would range somewhere between $45,000 and $50,000 annually. After or promotion as an associate, your basic pay will be $65,000 and range up to $90,000 based on your performance and experience. As a senior analyst, a basic compensation of $125,000 to $250,000 will be provided, and you can earn a hefty amount from the bonus, which can be 2-5 times the base compensation.

While speaking of a career in private equity, the pay scale ranges from $40,000 to $100,000 a year. Apart from basic remuneration, additional benefits like bonuses and other payments can get you good money.

Equity Research vs Private Equity – Pros & Cons


As a candidate pursuing your career in the field of equity research, pros and cons in your career aspects will be:

Pros

  • Good salary
  • Ample of exit options and opportunities to work
  • Stable working hours

Cons

  • Desk-bound job
  • Longer durations of seating in front of the computer
  • Interdepartmental pressure

In the field of Private equity, your career-related pros and cons would include the following:

Pros

  • Convenient working hours
  • Good salary
  • Ample of knowledge to gain   

Cons

  • In-depth study of things
  • Not much recognition as compared to other fields

What to Choose?


After reading the detailed analysis of both professions, it becomes clear that both options can earn you well and give you monetary benefits. While pursuing a career in equity research can bring you into the limelight, as an aspirant of the private equity sector, you would have to compromise on the limelight factor. Private equity jobs can provide you with valuable experience, which you can use if you decide to foray into other sectors later. Equity Research jobsEquity Research JobsEquity research analysts jobs are competent for the candidates who have a keen interest and understanding in financial analysis of the companies. The profile includes suggesting equities as well as buying and selling the stocks on the clients' behalf.read more are for those who have a strong liking towards finance and financial analysis. The decision to choose anyone from the given options is extremely difficult as both the jobs can take your career to different heights.

Reader Interactions

Comments

  1. Michael K says

    You make the topics simple to understand and comprehend.
    Thank you for the insights.

    • Dheeraj Vaidya says

      Thanks for your kind words!

  2. Faraz says

    It was worthy to read this post.. thanks

    • Dheeraj Vaidya says

      thanks Faraz!

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