What is the role of industry analysis in equity research?

The role of industry analysis in equity research is primarily focused on assessing the competitive landscape and economic factors that affect a specific sector. This involves examining various elements such as market trends, competitive dynamics, regulatory influences, and macroeconomic factors that can impact the performance of companies within that industry. By providing insights into how these factors interact and influence each other, industry analysis helps researchers understand the overall health and potential of the sector, as well as identify opportunities and risks for individual companies operating within it.

Understanding the industry context is crucial, as it allows analysts to compare companies more effectively and gauge their relative performance. It informs crucial decisions regarding investments by delivering a comprehensive view of the market environment in which a company operates, enabling better forecasting and more informed recommendations.