Discussion on Inderes research methods & practices

Equity research is in many ways more of an art than exact science. Inderes works with a fundamentals-based equity research approach - this means our research is founded on a view of each company’s fair value (based on business fundamentals) & attractiveness of the risk/reward ratio with a given valuation.

Some basic principles behind our recommendation policy can be found here (Under title “Inderes disclaimer”).

If you have any questions on how we do & communicate our research, want to challenge our approach or just have any thoughts on this topic, feel free to discuss it here :slight_smile: company-specific topics and research reports we can always discuss in the company threads, but lets use this thread for broader topics that are not necessarily specific to a particular company :+1:

8 gillningar


Glad to hear you like our material! :pray: we’re also more than happy to take some tough love when you spot something we can do better :wink:

I’ll reply here as the question relates to our research overall. Ramping up research coverage of any company requires us to build a good understanding of their markets. Some sectors we have more history with and in those cases starting a new coverage is quicker. We try to pool similar companies together so our analysts get information synergies where available.

With new sectors (like Aiforia with their very specific niche within healthcare software products) getting to a good understanding of market takes more work. Sources used and the order in which things are done varies a bit by analyst/sector but typically I go through the following:

  • Target company’s official reports (ideally dating back multiple years if available), prospectus and presentations (videos & powerpoints) and other published information (company website etc.)
  • Sources cited by the company in their communication (assess the validity of their statements independently)
  • Peer companies’ official reports / websites
  • Industry/Market study companies’ articles & reports (depending a bit on availability)
  • Articles by industry thought leaders
  • Find counterarguments for key statements forming the company’s equity story (figure out what you think is reasonable to believe & where the key risks are)
  • Test your counterarguments and drill into details in a meeting with company management (could take anything from ~2 to 8 hours)
  • Talk to any connections we have in the industry (not always possible)

Writing the initiation of coverage -report (usually ~30-50 pages) is also a great way to get clarity on what really matters for a given company. In many cases after going through a big pile of information you can pinpoint just a handful of things that make or break the company’s equity story. During the ~4-6 weeks we spend on the initiation report we get to a good level of comfort with our views.

Our analysts often have some experience/connection to the sectors they analyse (not always), but I think this is only very rarely a requirement (maybe only for drug developers) to do quality research.

3 gillningar

You inadvertently explained one reason why I read your analyses.

I would never have the time and skill to delve so thoroughly and comprehensively into a single company. I can read your analysis and then research further.

If I had to do the analysis myself from scratch, it would be impossible. You really have to put in a lot of work, especially when you start researching a new company in a specialized field.

Thank you for the exceptionally comprehensive response; I appreciate it. You’re doing great work.

Thank you! :slight_smile:

2 gillningar

@Antti_Luiro This is a minor thing, but I´m curious why Inderes doesn´t include metrics such as ROIC and ROCE in the reports or on the company sites? These are quite common metrics and I often end up on Morningstar to check them out :grinning:

3 gillningar

ROI & ROE we do have on company pages & reports, but not ROIC or ROCE like you said. They have a bit different use cases, I’m checking with my analyst colleagues why we have left those two out :thinking:

3 gillningar

I would say that this is mostly based on historical reasons and we have not reviewed this decision in years. We have got ROE, ROI and ROIC available automatically from our standard model (same for all companies).

I guess ROE has its place in tables as we are equity analysts. ROE is also fairly simple figure and also a common pair to compare with P/B. However, it is more arguable whether ROIC is more informative for investors than ROI as I think we should have one (but no more) figure that takes into account company entire capital and its return. I will bring this up to discussion with our development team. Differences between ROI and ROCE are relatively minor in my opinion, thus I do not see major need to add more figures to the tables.

7 gillningar