This lesson explores the role of financial research in investment banking and the advanced analytical techniques used to value companies and securities.
7.1 The Role of Research
Equity research analysts provide recommendations (buy, sell, hold) on stocks to support the trading and investment decisions of institutional clients. The IIM Calcutta programme covers “Securities Market Research and Valuation,” indicating that research is a key domain of investment banking .
7.2 Valuation Methodologies
Advanced valuation techniques are a core competency. These include, as noted in the IIM Ranchi syllabus  and LUM University programme :
-
Discounted Cash Flow (DCF):Â Estimating the present value of a company’s future cash flows.
-
Comparable Company Analysis (Comps):Â Valuing a company relative to its peers using multiples like P/E and EV/EBITDA.
-
Precedent Transactions:Â Valuing a company based on recent acquisition prices of similar companies.
-
Leveraged Buyout (LBO) Analysis:Â Calculating the potential returns to a financial sponsor in a leveraged buyout.
7.3 Financial Modeling
Financial modeling is the practical application of valuation theory. It involves building a mathematical representation of a company’s financial performance and using it to project future cash flows, assess creditworthiness, and value securities. The Kelley School of Business course explicitly identifies “financial modeling and valuation” as core skills taught in the module .