Security Analyst

The definition of ‘security analyst’

Security specialist is a financial professional who studies various industries and companies, provides research and evaluation reports, and making buy, sell, and/or recommendations.

Analyst breaking down the “security”

Security intelligence to monitor the execution of one or more stocks, sector, industry, or economy in the market. Futures contracts are not securities, since their performance does not depend on the management or activities outside or third party. However, options on these contracts are considered securities, since the performance depends on the actions of a third party.

Security analyst performs fundamental and/or technical analysis of securities on the market to help retail and institutional investors to make investment decisions. Fundamental analysis is based on fundamental economic factors such as financial statements and technical analysis focuses on price trends and momentum. Evaluation of the implementation of the security analyst determines whether he puts out the buy, sell or hold recommendation on the financial markets. Customers and third parties, usually to pay for access to these reports.

The analysis is done in the securities involves gathering and interpreting financial data. The data comes from a variety of sources, including financial reports publicly available on Edgar (Electronic data gathering, Analysis and retrieval) online database, financial publications, exchange of information with financial researchers and other analysts, etc. By building financial models based on the data, the security analyst can better understand the financial condition and prospects of the profitability of the company or industry.

Depending on the reasons for the analysis, an analyst can be tasked with preparation of estimate of income for future the company’s earnings per share (EPS). By placing estimates on the earnings of the company for a certain period (quarterly, annually, etc.), then analysts can use cash flow analysis to approximate fair value for the company, which in turn will give target price on the stock. Profit forecasts of analysts often combine to create a consensus forecast that is used as a benchmark against which the actual performance of the company is evaluated. Surprise earnings generally occurs when the company has no consensus either, earning more than expected or less.

Securities analysts for investment banks, private equity funds, venture capital funds, hedge funds and research companies. They participate in corporate activities such as mergers and acquisitions (M&A), corporate restructuring, bankruptcy and other organizational steps that may affect the financial value of the firm.

Security professionals APT with spreadsheets and numbers, and must be able to clearly explain the results of their analysis of customers, management and colleagues in the industry. Many analysts have a bachelor’s degree in Finance and to take on additional post-graduation certification (e.g., CFA) with the aim of increasing their knowledge about the capital markets.

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