workflow-er-initiating-coverage

# Equity Research: Initiating Coverage ## What this skill covers A five-task pipeline for initiating coverage on a new company. Each task produces a specific deliverable; tasks are executed sequentially with explicit user confirmation between steps. The output is a 30-50 page institutional equity research report meeting sell-side publication standards. ## Core Rules - Every number from a corp-finance-mcp or FMP tool call — never LLM-generated - At least 2 independent valuation methods for any price target - Bull/base/bear scenarios with probability weights mandatory - Source attribution for every figure ## Task 1 — Company Research **Output:** 6-8K word research document covering business model, competitive landscape, management, and TAM. **Tools:** - `fmp_company_profile` — company description, sector, industry, market cap, employees - `fmp_income_statement` — 3-5 years historical revenue, margins, earnings - `fmp_balance_sheet` — asset base, capital structure, working capital - `fmp_cash_flow` — operating cash flow, capex, free cash flow generation - `fmp_key_metrics` — revenue per share, debt/equity, ROIC, book value - `fmp_financial_ratios` — profitability, leverage, efficiency, valuation ratios **Sections:** 1. Business model and revenue drivers 2. Competitive landscape and market positioning 3. Management track record and capital allocation history 4. Total addressable market sizing (TAM/SAM/SOM) 5. Key risks and competitive threats ## Task 2 — Financial Modelling **Output:** Integrated 3-statement model summary with 5-year projections. **Tools:** - `three_statement_model` — integrated IS/BS/CF with circular reference resolution - `fmp_income_statement` — 3 years historical data as base - `fmp_balance_sheet` — historical balance sheet for working capital trends - `fmp_cash_flow` — historical capex intensity and cash conversion **Deliverable includes:** - Revenue build-up by segment or driver - Margin trajectory with explicit assumptions per line item - Capex and depreciation schedule - Working capital assumptions (DSO, DIO, DPO trends) - Debt schedule and interest expense - Balance sheet integrity check (A = L + E every period) ## Task 3 — Valuation Analysis **Output:** Valuation summary with base/bull/bear price targets and full sensitivity analysis. **Tools:** - `wacc_calculator` — CAPM-based cost of capital - `dcf_model` — discounted cash flow with terminal value (both Gordon Growth and exit multiple) - `comps_analysis` — trading multiples vs 4-6 comparable companies - `sotp_valuation` — sum-of-the-parts for multi-segment businesses - `target_price` — blended target from multiple methodologies - `sensitivity_matrix` — WACC vs terminal growth; exit multiple vs EBITDA growth - `monte_carlo_dcf` — stochastic valuation; median value and 90% confidence interval **Rules:** - Terminal value must be 50-75% of enterprise value — if >80%, extend the forecast period - Trading comps on EV/EBITDA, P/E, EV/Revenue with median and mean - Sensitivity tables: WACC ±100bps vs TGR ±50bps (minimum) ## Task 4 — Exhibit Generation **Output:** Data tables for report inclusion. **Tools:** FMP historical data endpoints for trend series. **Tables required:** - Revenue growth and margin trends (5-year historical + 5-year projected) - Valuation multiple history (EV/EBITDA, P/E, EV/Revenue) - Peer comparison table (multiples, growth, margins, returns) - Free cash flow bridge (EBITDA to FCF walk) - Capital structure evolution (debt maturity profile, leverage trend) ## Task 5 — Report Assembly **Output:** Final 30-50 page initiating coverage report. **Report structure:** 1. Investment Summary (1 page) — rating, price target, key thesis, upside/downside 2. Company Overview (2 pages) — business model, history, competitive position 3. Industry Analysis (2 pages) — TAM, competitive dynamics, secular trends 4. Financial Analysis (3 pages) — historical performance, projection model, key metrics 5. Valuation (3 pages) — DCF, comps, SOTP, sensitivity tables, football-field chart data 6. Risk Factors (1 page) — company, industry, and macro risks ranked by probability and impact 7. Appendix — detailed financial statements, comp sheet, methodology notes **Prerequisites:** Task 5 requires all prior task outputs. Task 3 requires Task 2 output. ## Output format Final report includes: investment rating (Buy/Hold/Sell), price target, key metrics table, sensitivity tables, three scenarios with probability weights. ## Quality gates - [ ] At least 2 valuation methods used for price target - [ ] Monte Carlo median and 90% CI produced - [ ] Bull/base/bear scenarios with probability weights summing to 100% - [ ] Terminal value between 50-75% of enterprise value - [ ] Balance sheet check: A = L + E in every forecast period - [ ] All figures cited with tool name and key assumptions ## Related skills - `workflow-er-earnings-update` — subsequent updates once coverage is initiated - `workflow-er-thesis-tracker` — ongoing bull/base/bear tracking framework - `workflow-er-model-update` — model revisions triggered by new information - `workflow-deal-citation-standards` — citation format for all tool outputs and filings - `workflow-deal-quality-checklist` — final QC before publishing