workflow-er-model-update

# Equity Research: Financial Model Update ## What this skill covers A structured model revision workflow triggered by material new information. Isolates which assumptions changed, updates the three-statement model, recalculates valuation, and produces a concise revision note with side-by-side estimates and a rating decision. ## Inputs - Company ticker and the triggering event (earnings, guidance change, M&A, macro shift) - Prior model assumptions (from the most recent `workflow-er-initiating-coverage` or previous model update) - Updated inputs provided by the triggering event ## Workflow ### Step 1 — Identify changed assumptions Pull latest actuals or announcements: - For earnings: call `fmp_income_statement` with latest period - For M&A: pull transaction details and synergy assumptions - For macro: note interest rate, FX, or commodity change and its P&L impact Compare actual vs prior model assumptions. Identify: - Which line items changed (revenue, margin, capex, WACC, other) - Direction and magnitude of each change - Whether the change is one-time or persistent (affects forecast run-rate) Materiality threshold: changes >5% to any forecast-year revenue, EBITDA, or EPS trigger a full model update. Changes <5% trigger a note only. ### Step 2 — Update the three-statement model Call `three_statement_model` with revised assumptions: - Adjust revenue growth, gross margin, operating margin, capex, working capital as warranted - Re-solve the interest expense / revolver draw circular reference - Verify: A = L + E in every forecast period after update ### Step 3 — Recalculate valuation Call `dcf_model` with updated projections: - Revised DCF value with updated free cash flow stream - If WACC changes (due to macro shift): recompute via `wacc_calculator` first Call `target_price` with updated DCF and comps: - Call `comps_analysis` if peer multiples have shifted materially - Produce the revised blended price target Call `sensitivity_matrix` with updated inputs: - WACC ±100bps vs TGR ±50bps minimum - Add the changed variable as a third sensitivity axis if it is the primary driver ### Step 4 — Rating review Assess whether the model revision changes the rating: - **Maintain:** new PT within ±10% of prior PT, thesis unchanged - **Upgrade:** new bull/base PT materially above prior, thesis improving - **Downgrade:** new bear/base PT materially below prior, thesis deteriorating If a rating change is warranted, trigger `workflow-er-thesis-tracker` to update scenario weights. ### Step 5 — Revision note Produce the model update note: 1. **Headline:** old PT → new PT, rating maintained/changed, event trigger 2. **What changed:** bullet list of revised assumptions with direction and magnitude 3. **Old vs new estimates table:** | Metric | FY[prior] actual | FY[n] old est | FY[n] new est | Change | FY[n+1] old | FY[n+1] new | Change | |--------|-----------------|--------------|--------------|--------|-------------|-------------|--------| | Revenue ($M) | | | | | | | | | EBITDA ($M) | | | | | | | | | EBITDA margin (%) | | | | | | | | | EPS ($) | | | | | | | | 4. **Valuation update:** old PT, new PT, methodology (DCF weight, comps weight) 5. **Updated sensitivity tables** 6. **Rating decision with rationale** ## Output format - Revision note: 2-4 pages (concise, focused on what changed and why) - Updated estimate table (old vs new side-by-side) - Updated sensitivity matrix - Rating decision with explicit rationale ## Quality gates - [ ] Materiality check documented (>5% change triggers full update) - [ ] `three_statement_model` re-run with revised inputs — not adjusted manually - [ ] `dcf_model` and `target_price` re-run with updated free cash flows - [ ] A = L + E verified post-update - [ ] Old vs new estimates table complete for at least 2 forward years - [ ] Rating decision explicitly stated: maintain / upgrade / downgrade ## Related skills - `workflow-er-earnings-update` — earnings notes that frequently trigger model updates - `workflow-er-thesis-tracker` — scenario weight revisions when a rating change is warranted - `workflow-er-initiating-coverage` — original model that this skill updates - `workflow-deal-citation-standards` — citation format for revised tool outputs in the revision note