Sell-Side Equity Research Key Performance Indicators (KPIs)
Corporate executives often underestimate the value of sell-side equity research.
My philosophy holds that Sell-Side Equity Research Analysts equal the salesforce for your stock.
Sell-Side Equity Research can multiply and enhance the efforts of the C-Suite and Investor Relations Officers (IROs) in terms of getting investors into the stock.
Therefore, management teams must make themselves aware of the KPIs relevant to how Sell-Side Research Analysts get paid, and use these levers to their advantage to attract and maintain Sell-Side coverage.
Eight KPIs to Remember When Trying to Build Sell-Side Coverage
Investor Phone Calls
Dialing for dollars represents the primary sport of Sell-Side Analysts. If you are not talking to the buy-side, then you are not relevant, period. A company needs to be able to provide a story and set of catalysts that can drive or improve the analyst’s engagement with the buy-side. Sometimes, the impetus may be as simple as the company can provide valuable insights into the analyst’s favorite or most important stock call at the moment.
Companies Covered
Every Sell-Side Research franchise needs at least 10 stocks covered to remain relevant. If you are a public company you have this requirement covered. The way a company can provide value revolves around being in the right Starmine industry classification. Sometimes, a Sell-Side Research Analyst lacks enough companies in a vertical where he or she is crushing performance. Maybe your company can help the analyst hit the Starmine threshold in order to get an award.
Published Notes
Frequency of publication represents a key metric for Sell-Side Analysts. The more they publish value-add research, the more valuable their franchise becomes. Management needs to provide much more than four quarterly earnings calls to drive high quality research coverage. The more catalysts, the more proprietary advantages, and more information management provides, the easier it becomes to drive research engagement.
AM / Mid-day Call Appearances
Analysts are judged on how often they engage with the Institutional Salesforce via the AM and Midday calls. Interactions illustrate traction with the salesforce and engagement with investors. If your company has no catalysts or press releases, then the analyst will not have much to say about you, making coverage a more difficult proposition.
Analyst Marketing
Analysts must meet investors in their offices on a regular basis. Does your company provide the analyst a reason for the investor to take his or her meeting?
Corporate Access
Many analysts face a quota around corporate access involving non-deal roadshows (NDRs) and conferences. Analysts typically need to do one NDR per company covered per year, which is a tall order. NDRs are one of the most valuable currencies a company has available to it in order to entice Sell-Side Research coverage.
Investment Banking
The easiest way to attract Sell-Side Equity Research coverage revolves around investment banking revenues. Any type of transaction will provide easy monetization to the investment bank and generate a strong impetus to initiate coverage. The problem is investment banking driven coverage is hard to maintain and sustain over time if the analyst does not believe in your story. Building coverage via this lever represents a short-term fix that falls apart once investment banking opportunities dry up.
Trading Commissions
Sell-Side Analysts get paid and maintain tenure based on the trading commissions of their covered companies. A management team must consider current trading volumes and what can be done to increase volatility to improve trading volume to get more coverage.
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