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What are the best practices for incorporating growth prospects into your research report?

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When you write a research report for investment banking, you need to analyze the growth prospects of the company or industry you are covering. Growth prospects are the expected future performance and potential of a business, based on factors such as market size, demand, competition, innovation, and strategy. Incorporating growth prospects into your research report can help you provide a more accurate and compelling valuation, recommendation, and pitch for your clients and investors. In this article, you will learn the best practices for incorporating growth prospects into your research report, such as:

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Raguram Raamakrishnan

Associate Director - Deal Advisory - KPMG | 12+ yrs experienced professional in Corporate Finance/ Investment Banking/…
Tuluhan Erdemi

Independent M&A Advisor | 12 years of experience | Identifying investors/ targets, valuation, due-diligence…

1 Define your growth drivers

The first step is to identify and define the key drivers of growth for the company or industry you are researching. These are the factors that influence the revenue, profitability, and market share of the business, such as customer segments, product offerings, pricing, distribution channels, expansion plans, and competitive advantages. You should explain how these drivers affect the growth prospects of the business, and provide evidence and data to support your claims. For example, you can use industry reports, customer surveys, market trends, and financial statements to show how the growth drivers impact the sales, margins, and earnings of the business.

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2 Project your growth scenarios

The next step is to project the growth scenarios for the company or industry you are researching. These are the possible outcomes of the growth prospects, based on different assumptions and variables. You should use a range of scenarios, such as base case, best case, and worst case, to reflect the uncertainty and volatility of the market conditions and the business performance. You should also use appropriate methods and models to project the growth scenarios, such as historical trends, peer comparisons, industry benchmarks, and discounted cash flow analysis. For example, you can use a sensitivity analysis to show how the growth scenarios change depending on the changes in the key drivers.

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Tuluhan Erdemi

Independent M&A Advisor | 12 years of experience | Identifying investors/ targets, valuation, due-diligence, integration, M&A process management services
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While preparing the growth scenarios, there are two main variables: revenue growth and profitability. Looking only at the revenue growth scenarios under best, base and worst cases would not be sufficient. Margins in the future should also be tested against those cases.

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3 Evaluate your growth opportunities

The third step is to evaluate the growth opportunities for the company or industry you are researching. These are the potential ways to enhance or accelerate the growth prospects of the business, such as new markets, new products, new partnerships, new acquisitions, or new innovations. You should assess the feasibility, attractiveness, and risks of the growth opportunities, and provide a rationale and a recommendation for pursuing or avoiding them. For example, you can use a SWOT analysis to show the strengths, weaknesses, opportunities, and threats of the growth opportunities.

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4 Communicate your growth story

The final step is to communicate your growth story for the company or industry you are researching. This is the narrative that summarizes and highlights the main points and insights of your growth analysis, and persuades your audience to take action or make a decision. You should use clear, concise, and compelling language, and use charts, graphs, tables, and visuals to illustrate your growth story. You should also tailor your growth story to your specific audience, purpose, and context, and address their needs, expectations, and concerns. For example, you can use a pitch deck, an executive summary, or a one-pager to communicate your growth story to different stakeholders.

By following these best practices, you can incorporate growth prospects into your research report more effectively and efficiently, and deliver a high-quality and high-impact product for your investment banking career.

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Raguram Raamakrishnan

Associate Director - Deal Advisory - KPMG | 12+ yrs experienced professional in Corporate Finance/ Investment Banking/ Investment Research | Award winning Equity Analyst | Visiting Lecturer at CSE, SEC, UoJ & UoK
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I cannot emphasize enough the importance of focusing on the following ; 1) Defining the industry of the target. 2) Understanding the growth phase in which the industry operates. 3) Identifying the underlying factors influencing growth or anticipated structural changes. 4) Assessing how the target is expected to benefit and grow its market share. For instance, a frontier country like Sri Lanka experiencing significant technological disruptions, a payment gateway company positioned to capitalize on the shift from cash transactions to digital payments is poised for growth. Clearly defining market size with supporting numbers & conveying the factors influencing this shift will instill confidence in potential investors on the target.

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5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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What are the best practices for incorporating growth prospects into your research report?

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1 Define your growth drivers

2 Project your growth scenarios

3 Evaluate your growth opportunities

4 Communicate your growth story

5 Here’s what else to consider

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