What makes for a great valuation analyst?

March 03, 2022 / Muthukumar K

Valuation analysts on the buy and sell side operate in an extremely competitive environment. While financial prowess and extensive research skills are part of the basic skill sets needed to execute their job, there are certain traits that make them stand out from the rest.

Here are six of them:

  1. Focus

Many of the successful analysts have vast years of experience in a niche area. For instance, some track the oil market or auto industry for decades. In this setup, they typically focus on a small set of companies and their business models. By keeping track of development and trends over a period of time, they eventually gain a deep understanding of the industry and become experts.

Often, there is less time in hand to react – making sharp focus the need of the hour.

  1. Turn data into useful information

It’s the age of information explosion. Every minute, all sorts of news reach you through various sources of media. It is important to filter them and absorb only the relevant ones. Otherwise, there is the risk of analysts gathering all sorts of data and not reaching any conclusion.

Moreover, some critical information can be a game-changer. For instance, access to details about acquisitions of unlisted companies. Being unlisted, information about their financials and business performance is not in the public domain.

However, some specialized databases capture data of such unlisted companies from the registrar of companies. Access to PAS-3 information, in turn, gives details about allotment of shares or securities of an unlisted entity within a month.

A successful analyst digs deeper into such extra information that is relevant and useful in his decision-making.

  1. Independent thinking

Herd mentality abounds in the stock market – perhaps out of fear of someone becoming the odd man (or woman) out. So, seldom there is independent thinking and the analysts play it safe by keeping their view in line with that of the majority.

However, the great analysts work on their conviction which in turn comes from deep insight into the stock or industry trends. With great clarity in their minds, they are willing to stand alone, if need be, in their conclusions. This trait really separates the men from the boys.

  1. Creative

How do you value a company with little historical data of performance or guess the growth trajectory of a new-age industry? Often, there are few data points available to value companies and that’s where right-brain thinking helps. Shrewd analysts search for the closest peer or data trends to connect the dots.

  1. Compelling communication

While incisive analysis makes for a good analyst, equally important is to communicate the findings in a clear and concise way to clients. Jargon-filled reports or complicated graphics can make it difficult to get the message across. So, the need of the hour is to communicate in a simple language sans jargon while being coherent in arguments.

  1. Learning from mistakes

The market is a great teacher. It teaches a lot day in and day out for those willing to learn. For instance, a wrong decision made on impulse costs a fortune while doing nothing often pays off especially if you are in for the long haul.

Similarly, a wrong assumption upsets an entire financial model. Analysts, therefore, need to have the ears to the ground and review past decisions and mistakes. A great analyst is seldom fixated on his views and is a constant learner.


A successful analyst uses relevant and cutting-edge data to his advantage. By being open and flexible, she strives to make decisions purely on data-backed conviction rather than following the herd.

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