How reliable are equity reports? Should we take it with a pinch of salt or follow?

Hi there,

For equity reseacrch reports, it is usually divided into two categories: Sell side and Buy side.

It is important to note that mot equity reseatches you see online/are readily available are all from sell-side analysts, working for a brokerage or firm that manages individual accounts and makes recommendations to the clients of the firm. Typically, they tend to have "Sell-side bias" and they earn commissions through recommendations..

With that in mind, do not use their equity research reports as the bible truth and its always prudent to do your research and cross-check across multiple sources of equity research reports.

It really depends on whether it is sell or buy side reports. Most of the equity reports are from sell side.

Think about it, sell-side analysts often put out “buy” ratings and almost never tell investors to “sell.” That is because they have other considerations to think of - for eg. The bankers in the same firm who worked hard for the IPO deal would not want their own analysts to be putting 'sell' on the stock.

That said, equity reports are a good way to get an initial overview of the company, as it consolidates the financial information and ratios for you. It definitely makes sense to compare reports and views from various sources whilst you do your own research to get more conviction on the stock.