Top 4 Must-Know Investment Banking Charts (Free Download Template included)

Updated on April 4, 2024
Article byWallstreetmojo Team
Edited byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

Investment banking charts refer to the different graphs, charts, financial models, or the valuation model, which helps the investment banking firms make the other analyses used for its functioning. For example, the various investment banking charts include PE chart, PE band chart, football field graph, scenario graph, etc.

Investment Banking Charts – Football Field & PE Band Charts

I think the greatest gift of Dan Bricklin (“father” of the electronic spreadsheet) and Bill Gates to investment banking humanity is the Excel spreadsheet software. It allows the analyst to create rock star financial and valuation models and help present their analysis in some awesome pictorial format (graphs).

With this, I thought, why not a tutorial on the most popular investment banking, graphs vs. charts?Graphs Vs. ChartsGraphs are mostly a numerical representation of data which shows the relation of change in numbers to how one number is affecting or changing another. However, charts are the visual representation of categories that may or may not be related to each other.read more. In this article, I will discuss the following set of graphs –

  1. PE Chart
  2. PE Band Chart
  3. Football Field Graph
  4. Scenario Graph (my favorite)

Download the spreadsheet templates for all the graphs here

Table of contents
Top 4 Must Know Investment Banking Charts

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# 1 – PE Chart

This 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 is, in essence, a payback calculation. It states how many years’ earnings it will take for the investor to recover the price paid for the shares. PE (price to earnings) charts help us understand the multiple values over time. Other things being equal, when comparing the price of two stocks in the same sector, the investor should prefer the one with the lowest PE. If you are new to PE ratiosPE RatiosThe 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, you may refer to this valuation primer article on relative valuations.

What is a PE Chart?

PE chart helps the investors visualize the trading valuation multiple of stock or index over time. For example, the below PE graph of Foodland Farsi is depicted for March 2002 until March 2007.

PE Chart
Interpretation of PE Charts
  • Historically, Foodland Farsi has traded an average PE multiple of 8.6x.
  • The standard deviation of the PE multiple signifies the volatility of the PE multiple.
  • We note that Foodland Farsi has traded within the range formed by the Upper (defined as Average PE + 1 Std Dev = 12.2x) and the Lower (Average PE – 1 Std Dev = 4.9x).
  • We note that the PE multiple for the period after June 2006 has crossed the upper standard deviation line signifying a higher valuation multiple.
Why is it useful?
  • This chart is fairly useful because this provides the historical valuation details quickly and easily.

You may take not more than 30 seconds to interpret such a graph.

Dataset for PE Chart

Let us now prepare the PE chart as provided above. Please download the PE Chart dataset here. The dataset includes the following: –

  • Date
  • Historical Stock Prices
  • EPS estimate (forward) – Please note that this data may not be available in the public forum. You may use Bloomberg, Factset, and Factiva (all paid versions) to access such data.
PE Chart Dataset
Building a PE Chart
Step 1 – Calculate the PE Ratio

Since we already know the stock price and the forward EPS, calculate the PE ratio of the stock for each date.

Calculate PE Ratio
Step 2 – Calculate the Standard Deviation of PE

Calculating standard deviation is easy in Excel. You can use the formula STDDEV to calculate the standard deviation of the stock. Do not forget to use absolute referencesUse Absolute ReferencesAbsolute reference in excel is a type of cell reference in which the cells being referred to do not change, as they did in relative reference. By pressing f4, we can create a formula for absolute referencing.read more to display the same standard deviations across the dates.

PE Chart - Standard Deviation
Step 3 – Calculate the Average PE

Calculate the average PE of the stock using the formula AVERAGE and use absolute references as the average of the data should remain constant across all the dates.

PE Chart - Average
Step 4 – Calculate the UPPER and the LOWER range.

Calculate the UPPER and the LOWER range by using the following formula: –

  • UPPER = Average PE + Standard Deviation
  • LOWER = Average PE – Standard Deviation
PE Chart - Calculate the UPPER and LOWER
Step 5 – Plot the Graph using the following data –
  1. Forward PE
  2. Average PE
  3. UPPER
  4. LOWER
Plot PE Chart
Step 6 – Format the Graph

It is very important as formatting can win if you highlight the important areas and make it more intuitive to comprehend.

PE Chart

Like the PE charts, you can also make a Price to Book Value Chart (P/BV), PEGPEGThe PEG ratio compares the P/E ratio of a company to its expected rate of growth. A PEG ratio of 1.0 or lower, on average, indicates that a stock is undervalued. A PEG ratio greater than 1.0 indicates that a stock is overvalued.read more Graph, Price to Sales, or Price to Cashflow Charts.

#2 – PE Band Chart

What is PE Band Chart?

Like the PE ratio graph, the PE band is also computed from the historical PE ratios for each stock/index. The line plotted from the average highest PE will form the upper PE band. At the same time, the average lowest PE will form the lower PE band. The middle PE band will be derived from the mean of the upper and lower band.

PE Band Chart
Interpretation of PE Band Chart

The above chart can be interpreted as follows: –

  • The price line (colored in GREEN) touches the maximum PE band line of 20.2x. Therefore, it implies that the stock is trading at its maximum PE and may be overvalued.
  • The upper band would reflect the stock’s historical maximum price if it traded at its maximum PE. For example, If we trace back the maximum PE band line till March 2002, we find that the stock would have sold at ₹600/- if the PE during that period had been 20.2x.
  • Also, we note that the stock has touched the lowest PE band of 5.0x many times in the last five years. Therefore, it denotes an ideal opportunity to buy the stock.
Why is PE Band Chart Useful?
  • The advantage of the PE band is its consideration of both the fundamental factor (i.e., profitability) and the historical trading pattern of a stock.
  • The use of the PE band is especially meaningful for listed companies with good track records.
  • Its price tends to move within the PE band for a stock with stable earnings. In other words, the stock price in one extreme tends to move to the other extreme within the band.
  • Also, note that the PE band chart is different from the PE ratio graph as we note that the Y-axis represents the price of the stock rather than the PE multiple.
  • This PE band chart is effective because this graph can denote both the PE bands (valuation) and the corresponding prices. Along with the PE ratio graphs, this makes a case for taking a valuation call on stocks.
PE Band Chart Data set

The PE band chart data set differs from the one we used earlier. It is the same! We require the following:  –

  • Historical Stock Prices
  • Dates
  • Forward EPS
 Building a PE Band Chart
Step 1 – Calculate the Forward PEForward PEForward PE ratio uses the forecasted earnings per share of the company over the next 12 months for calculating the price-earnings ratio. Forward PE ratio formula = Price per share/Projected earnings per share read more for the Historical Dataset
Band Chart - Step 1 - Calculate the forward PE
Step 2 – Calculate the average, maximum, and minimum of the PE ratios
Band Chart - Step 2 - Calculate the Max Min and Average PE
Step 3 – Find the Implied Prices using the following formula

Calculate the implied prices using the procedure below: –

  • Price (corresponding to Average) = Average PE x (Historical EPS)
  • Price (corresponding to Maximum) = Maximum PE x (Historical EPS)
  • Price (corresponding to Minimum) = Minimum PE x (Historical EPS)
Band Chart - Step 3 - Calculate the Corresponding Prices
Step 4 – Plot the graph using the following: –
  • Stock Price
  • Implied Average Price
  • Implied Maximum Price
  • Implied Minimum Price
Band Chart - Step 4 - Plot the line chart
Step 5 – Format the Graph:-
PE Band Chart

You can make Band Charts for another set of valuation multiples like EV/EBITDA EV/EBITDAEV to EBITDA is the ratio between enterprise value and earnings before interest, taxes, depreciation, and amortization that helps the investor in the valuation of the company at a very subtle level by allowing the investor to compare a specific company to the peer company in the industry as a whole, or other comparative industries.read more (Enterprise Value Enterprise ValueEnterprise value (EV) is the corporate valuation of a company, determined by using market capitalization and total debt.read more to EBITDA), P/CF, etc

#3 – Football Field Graph

What is a Football Field Chart?

Sometimes it is easier to represent the data in floating columns or bars in which columns (or bars) float, spanning a region from minimum to the maximum values. For example, below is a football field column chart.

Floating Chart
Interpretation of the Football Field Chart (above)
Data for Football Field Chart

Let us assume that you have been provided with the following data set. Naturally, you want to represent the below data in the best possible graphical format.

Floating Charts Data

There can be different ways of making graphs on such data. However, they may not provide great insights when making a regular line or bar graph. Below is the representation (poor) of these regular graphs: –

Line Graph

The problem with this representation is that it is very difficult to interpret this data.

Poor Representation - 1
Column Graph

Again, the same problem is that it is very difficult to interpret such data.

Poor Represenation - 2

It is now easy to understand that the solution lies in making the floating column or the bar chart in excel.

Building a Football Field Chart
Step 1 – Create the Two series with Minimum and Range

The first series represents the minimum, and the second represents the range (maximum-minimum). Please see below the two series on which we create our graph.

Floating Charts - converted data
Step 2 – Choose Stacked Column Chart

The secret to making the floating chart is to use the column chart in excel Column Chart In ExcelColumn chart is used to represent data in vertical columns. The height of the column represents the value for the specific data series in a chart, the column chart represents the comparison in the form of column from left to right.read more in an effective way by selecting the “stacked column chart in excelStacked Column Chart In ExcelA stacked column chart in Excel is a column chart where multiple series of the data representation of various categories are stacked over each other. The stacked series are vertical.read more” using two series.

stacked column

You will get the below chart.

floating chart - step 2
Step 3 – Make the “minimum” columns Invisible!

Select the minimum column bars (blue color) and from the top menu, change the color to “No Fill.”

Floating Chart - No fill

With this, you will get the graph below.

Floating Chart - Step 3
Step 4 – Format the graph and make it awesome!
  • Change the X-axis to reflect the valuation methodology.
  • Remove the legends on the right-hand side (range and minimum)
  • Change the color of the bars to suit your color taste (please do not make the columns pink; it is investment banking, you know!)
Floating Chart

# 4 – Scenario Graphs

What are Scenario Graphs?

Sometimes, we need to accept that valuation is not scientific. It depends on assumptions and scenarios. While we value a stock, you may make different beliefs while preparing a financial model – projecting an income statement, balance sheetBalance SheetA balance sheet is one of the financial statements of a company that presents the shareholders' equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner's capital equals the total assets of the company.read more, and cash flows. While we take the most typical case while we do the valuation, it is equally important to show the impact of different topics, such as if the tax rates go down or if the production moves up more than expected. These scenarios can be easily built using financial models.

You can use the following financial models for your reference: –

Please see below a sample scenario graph: –

Valuation Scenario Graph
Interpretation of Scenario Graph
Dataset for the Scenario Graphs

The dataset required for this graph is shown below. The table below arrives after inputting new assumptions in your financial model and recalculating the fair share price.

Scenario Graph Dataset
Building a Scenario Graph

We will assume that you already have the data like the one above. With this, let us look at the steps involved in building the scenario graphs: –

Step 1 – Add two columns, X and Y, to the data set (tricky and most important)
  • This graph builds on the Football Field Graph (#3) we made earlier.
  • Again, we use the column stacked graph, where Y data gets stacked over the X data.
  • In addition, we make the X data set invisible to get the floating Y dataset.
  • For example, if you closely observe the scenario graph – downside scenario – Price decrease shows a floating visible data of $17 (Y data). Immediately below this dataset is the invisible $283 (X data).
Step 2 – The completed X and Y dataset should look something like belowScenario Graph Dataset - build 1
Step 3 – Prepare the Column Stacked Graph on the X and Y datasets

Please note that we are not preparing the chart on the original data set. Instead, we prepare the converted dataset (X and Y) chart.

Scenario Graph - Step 3
 Step 4 – Make the X dataset hidden.

Hide the X dataset by selecting the columns and choosing “No Fill” from the menu’s formatting options.

Scenario Graph - Step 4
Step 5 – Format the Graph, and be awesome!
Valuation Scenario Graph

Conclusions

As we noted above, there can be a different graphical representation of stock valuation. We use such graphs to save time for the clients and make the research report or pitch book Pitch BookPitch Book is an information layout or presentation used by investment banks, business brokers, corporate firms, and others to provide potential investors with the firm's main attributes and valuation analysis, which helps them decide whether or not to invest in the client's business. A pitch book is also known as Confidential Information Memorandum, which is used by the firm's sales department to help them sell products and services to a client.read more a time-saving and effective document. You will find the four types of valuation graphs in a majority of the tier-1 brokerage firm research reports. I had worked earlier at JPMorgan as an equity research analyst and found the football field and scenario graphs to be the most useful representation for clients. Of course, you can use these in ratio analysis Ratio AnalysisRatio analysis is the quantitative interpretation of the company's financial performance. It provides valuable information about the organization's profitability, solvency, operational efficiency and liquidity positions as represented by the financial statements.read more graphs too.

What’s Next?

If you learned something new or enjoyed the post, please comment below. Let me know what you think. Many thanks, and take care.

Reader Interactions

Comments

  1. Musa Alister Lamin says

    Thanks for sharing this wonderful piece

  2. Dan says

    Thanks for your resourceful financial insights. Keep on sharing your knowledge

    • Dheeraj Vaidya says

      Thanks for your kind words!

  3. Eddie says

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  4. Manisha says

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    • Dheeraj Vaidya says

      Thanks for your kind words!

  5. Ravi Kumar Gupta says

    I am a regular visitor. Thank you for explaining the concepts so well.

    • Dheeraj Vaidya says

      thanks Ravi!

  6. Mohammad Salman Ghani says

    Thanks for the all graphs. Really helpful.

    • Dheeraj Vaidya says

      thanks Mohammad!

  7. Jadranka says

    Thanks for sharing this. I am happy that your blog reached me.
    You have the gift to share your knowledge on very simple ,concise and understandable way.

    • Dheeraj Vaidya says

      Thanks Jadranka :-) Glad you know that you find these resources useful.
      Best,
      Dheeraj

      • EDMUND STRAMISS says

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        • Dheeraj Vaidya says

          thanks Edmund. Glad you found these useful.

      • Steve says

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        • Dheeraj Vaidya says

          Thanks for your kind words!

  8. Abhinav Kaul says

    Hi Dheeraj,

    Can you mail me the video of this tutorial

    • Dheeraj Vaidya says

      Hi Abhinav, I don’t have the video tutorials of these charts as of now.

  9. Aditya says

    i stumbled upon this blog when i look for PE Band formula, thanks for the awesome tutorial sir! it helps me a lot in building a similar template for myself.
    but i have a question. why do you “limit” the max PER to 50 and the min PER to 0.001?
    =(MIN(50;MAX($G$6:$G$267)))
    =MAX(0.001;MIN($G$6:$G$267))

    your explanation would be much appreciated

    • Dheeraj says

      Hi Aditya,

      not much logic here. You can change the limits so to accommodate your stock PER fluctuations.

      Thanks,
      Dheeraj

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  12. Oketak says

    I know that you get the estimated eps from bloomberg or similiar services, but can you explain how is it that the eps data is not quarterly in your example but weekly? Thanks

    • Dheeraj says

      Hi Oketak,

      Each week, Bloomberg and many other service providers release the annual/quarterly EPS estimated for companies. This EPS which is released each week is an average of the estimates provided by different equity research analyst (jpmorgan, nomura, merrill etc). If even one of the analyst changes their EPS estimate, then then the average estimate would change.

      Thanks,
      Dheeraj

  13. Alex Lee says

    Hi,
    I see that in the excel file you provide you have fwd EPS filled in for every weekly entry. But is that practical when applying this? I see companies only have the Est EPS per quarter, and this will greatly affect the standard deviation afterwards.
    Thanks.

    • Dheeraj says

      HI Alex, you can get the data of fwd EPS every week from databases like bloomberg etc. it is not readily available publicly.
      Thanks,
      Dheeraj

  14. Chern yi says

    THIS IS A GEM! So glad I found this :) Thank you so much for sharing!

    • Dheeraj says

      Thank you Chern!

  15. adeel says

    Well explained! Btw how are you coming up with weekly epsforecasts?

  16. Piyush Arora says

    Hi Dheeraj,
    Informative and insightful piece.
    Quick question, where are we supposed to download Indian-based historical P/E and per share prices?
    You wrote, “Please download the PE Chart dataset here. ”
    But the hyperlink (if it was intended to be there) doesn’t seem to work.
    Really want this data, paid or not.
    Looking forward to hearing from you soon.
    Regards,
    Piyush
    Fellow U.S based analyst !

  17. mahendra edunoori says

    what a great things that i am learning from your articles….

  18. Rohitesh says

    Extremely well explained sir. I have been a fan of your teaching…since my IICM days, when you had taught us Financial Modelling..way back in 2008-09.

    Refreshing to read your articles Sir.
    Regards,

    • Wall Street Mojo says

      Thank you Rohitesh for your kind words.

  19. Madhu says

    thank you. it is really a useful stuff. thanks once again.

    • Wall Street Mojo says

      Hi Madhu,

      I am glad you found this article on Investment Banking Charts to be useful.

      Best,
      Dheeraj

  20. Joseph says

    Great stuff especially twisting Excel around for optimal results. Keep the good work and I impatiently await your next issue.

  21. Amrit V says

    Amazing and all free. Thanks very much for sharing

  22. MUHAMMAD NAWAZ says

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    will you please help me in this matter i shall be very greateful to you in this matter if you help me

  23. Pravin says

    Its really really great Sir..

    Kindly keep posting to me for all such post.

    Thank you.

  24. henning says

    Nicely done – thank you

  25. Mona says

    Awesome.. Thanks for sharing this..

  26. Kinshook Chaturvedi says

    One of the best practical article on stock valuation. But where is the Excel sheet model which is downloadable ?

    • Wall Street Mojo says

      Hi Kinshook,

      Please look at the first set of paragraphs for “Download the Spreadsheet templates for all the graphs here”. You should be able to download the associated template.

      Thanks, Dheeraj

  27. Vishey says

    Hello Sir,

    I have one question? Do we need to know VBA for building financial models?

    • Wall Street Mojo says

      Hi Vishwantha, You will not require VBA for building financial models for Investment Banks. However, if you are doing lot of scenario analysis and data download and anlaysis, one can make efficient use of VBA for automating mundane tasks

  28. James says

    Can you give all this stuff in pdf form so that we can download .

  29. Mahesh says

    What an exciting and intelligent way of explaining. Language is very simple and easy to understand. Please continue to do so.

    Thanks,
    Mahesh

    • Wall Street Mojo says

      Thank you Mahesh for your kind words!

  30. Arinjay says

    Great Knowledge sharing process Sir !

  31. Neeraj says

    Awesome financial stuff. Amazing Work. Waiting for new IPO valuations.

  32. Raushan says

    Thanks …..

  33. Rajan says

    Thank you sir for sharing this knowledge. When are you going to write on DCF?

    • Wall Street Mojo says

      I am glad you liked the tutorials. A lot of subscribers want me to write on DCF. Will write about it soon.

      Thanks, Dheeraj