Industry and Company Analysis

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Introduction - Industry and Company Analysis

Approaches to Classifying Companies

Classification of Industries

Factors Affecting the Sensitivity of a Company to Business Cycle

Relation of “Peer Group” to a Company’s Industry Classification

Elements of Industry Analysis

Principles of Strategic Analysis

Effects of Various Factors on Pricing Power and Return on Capital

Industry Life Cycle

Impact of External Factors on Industry Growth, Risk and Profitability

Company Analysis

Course Resources

Quizzes

Lesson 5 of 11

Relation of “Peer Group” to a Company’s Industry Classification

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Elements of Industry Analysis

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A company's industry classification is the beginning of constructing a peer group, since all companies that work in a particular area are listed together. Analysts then research into the company's business to see if all members of the peer group are in fact similar in nature and comparable. Necessary omissions or additions are then made.

Analysts develop a peer group in the following way:

Use a classification system that is available; identify the company that is being evaluated.
Research annual reports and other available financial data regarding nature of business, size etc.
Collect information regarding competitors from annual reports or trade journals and research them as well.
Ensure all companies in the peer group derive their revenue from the same source as the subject company.