How to Write Equity Research That Wins the CFA Research Challenge
The CFA Institute Research Challenge is the premier global competition for finance students, testing your ability to analyze a real company and deliver professional-grade equity research. Winning teams don’t just demonstrate technical skill; they show clear thinking, compelling communication, and practical investment judgment.
Having reviewed dozens of winning reports and coached teams through the competition, I’ve identified the 8 essential elements that separate winning equity research from the rest. This guide covers everything you need to know: from building your investment thesis to structuring your report and delivering a winning presentation.
Whether you’re competing this year or simply want to improve your equity research skills for your career, these principles will transform how you approach company valuation and research writing.
The 8 Elements of Winning Equity Research
Every winning CFA Research Challenge report contains these eight elements, executed at a high level. Miss anyone, and you’ll fall short. Master all eight, and you’ll stand out from the competition.
1. A Clear, Defensible Investment Thesis
Your investment thesis is the foundation of everything. It answers the simple question: Should investors buy, hold, or sell this stock?
What Judges Look For:
- A specific recommendation (BUY/HOLD/SELL) with a target price
- Clear reasoning that connects company fundamentals to your recommendation
- Differentiated insight, something the market may be missing
- Intellectual honesty about risks and uncertainties
Common Mistakes:
- Thesis too vague (“The company has good growth prospects”)
- Recommendation doesn’t match the analysis
- Target price disconnected from valuation work
- Ignoring obvious counterarguments
Strong Thesis Example:
“We recommend BUY with a 12-month target price of $85, representing 25% upside. Our thesis centers on the market undervaluing the company’s SaaS transition, which we believe will drive margin expansion from 15% to 22% over three years as recurring revenue reaches 60% of the mix.”
This thesis is specific, quantified, and identifies a catalyst that the market may be underappreciating.
2. Rigorous Industry and Competitive Analysis
You can’t value a company without understanding its competitive environment. Judges want to see that you understand the industry dynamics shaping your company’s future.
What to Include:
- Industry structure: Market size, growth rate, key segments
- Competitive positioning: Porter’s Five Forces or similar framework
- Key success factors: What does it take to win in this industry?
- Competitive advantages: Does your company have a moat?
Framework Suggestion:
Use Porter’s Five Forces to structure your analysis:
- Threat of new entrants
- Bargaining power of suppliers
- Bargaining power of buyers
- Threat of substitutes
- Competitive rivalry
Pro Tip: Don’t just list the forces; connect them to your investment thesis. How do industry dynamics support (or threaten) your company’s ability to grow and earn returns?
3. Deep Financial Statement Analysis
Winning teams demonstrate mastery of the company’s financials, not just surface-level metrics, but a genuine understanding of what drives performance.
Key Areas to Cover:
Revenue Analysis
- Revenue drivers and mix (by segment, geography, product)
- Historical growth rates and trends
- Seasonality and cyclicality
Profitability Analysis
- Gross margin trends and drivers
- EBIT margin analysis
- Operating leverage effects
- Comparison to peers
Balance Sheet Quality
- Asset turnover and efficiency
- Liabilities to assets ratio
- Working capital management
- Debt levels and coverage ratios
Cash Flow Analysis
- Free cash flow generation
- Cash conversion (earnings to cash)
- Capex patterns (growth vs. maintenance)
Common Mistake: Presenting ratios without interpretation. Don’t just show that ROE is 15%, explain why it’s 15% and whether it’s sustainable.
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4. Well-Constructed Financial Model
Your financial model is where analysis meets valuation. It should be logically structured, clearly documented, and produce defensible outputs.
Model Best Practices:
- Transparent assumptions: Every input should be traceable and justified
- Driver-based forecasting: Project revenues from units × price, not arbitrary growth rates
- Scenario analysis: Show bull, base, and bear cases
- Internal consistency: Balance sheet must balance, cash flow must reconcile
Forecasting Tips:
| Line Item | Approach |
|---|---|
| Revenue | Build from segment drivers, market share, pricing |
| COGS | Tie to revenue mix, input costs, scale effects |
| Operating expenses | Separate fixed vs. variable, model leverage |
| Capex | Distinguish growth vs. maintenance |
| Working capital | Use historical turnover ratios |
Pro Tip: Judges often test your model understanding in Q&A. Know your key assumptions cold, especially revenue growth, margin trajectory, and terminal value inputs.
5. Robust Valuation Methodology
Your valuation should use multiple approaches and clearly explain how you arrive at your target price.
Recommended Approaches:
Discounted Cash Flow (DCF)
The gold standard for intrinsic valuation. Key components:
- Free cash flow to firm projections
- WACC calculation with justified inputs
- Terminal value (Gordon Growth or exit multiple)
- Sensitivity analysis on key drivers
Comparable Company Analysis
- Select truly comparable peers (industry, size, growth profile)
- Use relevant multiples (EV/EBITDA, P/E, EV/Revenue)
- Apply appropriate premium/discount for differences
Precedent Transactions (if applicable)
- M&A transactions in the sector
- Control premium considerations
Valuation Summary Table:
| Method | Value | Weight | Weighted Value |
|---|---|---|---|
| DCF | $82 | 50% | $41 |
| Comparable Companies | $78 | 30% | $23 |
| Precedent Transactions | $90 | 20% | $18 |
| Target Price | $82 |
Common Mistake: Using WACC or terminal growth rates without justification. Be ready to defend every input.
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6. Comprehensive Risk Analysis
Identifying and quantifying risks shows maturity and protects your credibility. Don’t hide from risks, address them head-on.
Risk Categories to Cover:
Company-Specific Risks
- Execution risk (can management deliver?)
- Key person risk
- Customer concentration
- Technology obsolescence
Industry Risks
- Competitive threats
- Regulatory changes
- Disruption from new entrants
Macro Risks
- Economic cycle sensitivity
- Interest rate exposure
- Currency risk
- Commodity price exposure
Risk Presentation Best Practice:
For each major risk:
- Describe the risk clearly
- Quantify the potential impact (if possible)
- Assess the probability
- Explain mitigating factors
Example:
“Customer Concentration Risk: Top 3 customers represent 45% of revenue. Loss of a major customer could reduce revenue by 15-20%. However, 10+ year relationships and high switching costs mitigate this risk. We assign medium probability.”
7. Professional Report Formatting
Presentation matters. A well-formatted report signals professionalism and makes your analysis easier to follow.
Formatting Guidelines:
Structure
- Executive summary (1 page max)
- Investment thesis and recommendation
- Industry analysis
- Company analysis
- Financial analysis
- Valuation
- Risks
- Appendices (detailed models, additional analysis)
Visual Elements
- Consistent chart formatting
- Clear, readable tables
- Strategic use of color (don’t overdo it)
- Professional fonts (no Comic Sans!)
Page Limits
- Respect the competition’s page limits strictly
- Use appendices for supporting detail
- Every page should add value
Pro Tip: Have someone outside your team read the report. If they can’t understand your thesis in 2 minutes, simplify.
8. Compelling Presentation and Q&A
The presentation is where competitions are won or lost. You must communicate your thesis clearly and handle tough questions with confidence.
Presentation Tips:
- Lead with the thesis: Don’t bury your recommendation
- Tell a story: Connect analysis to a narrative arc
- Practice timing: Stay within time limits exactly
- Balance the team: Everyone should present substantively
- Anticipate questions: Prepare for challenges to key assumptions
Common Q&A Topics:
Judges frequently probe these areas:
- “Why is your revenue growth assumption reasonable?”
- “Walk me through your WACC calculation”
- “What’s your biggest risk and how did you address it?”
- “Why should I believe your terminal value?”
- “What would make you change your recommendation?”
Q&A Best Practices:
- Listen fully before answering
- Acknowledge the question’s validity (“That’s an important consideration…”)
- Answer directly, then elaborate
- Admit uncertainty when appropriate, intellectual honesty scores points
- Refer to your analysis to support answers
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Frequently Asked Questions About the CFA Research Challenge
Q: What is the CFA Research Challenge?
A: The CFA Institute Research Challenge is an annual global competition where university students analyze a publicly traded company and produce a professional equity research report. Teams compete at local, regional, and global levels, presenting their analysis to panels of investment professionals. It’s considered the premier student competition for aspiring equity analysts and portfolio managers.
Q: How do you write a winning equity research report?
A: Winning reports contain 8 essential elements: a clear investment thesis, rigorous industry analysis, deep financial statement analysis, a well-constructed financial model, robust multi-method valuation, comprehensive risk analysis, professional formatting, and a compelling presentation. The best reports show differentiated insight, something the market may be missing, supported by thorough analysis.
Q: What valuation methods should I use for the CFA Research Challenge?
A: Use multiple valuation approaches to triangulate value. A DCF (discounted cash flow) analysis should be your primary method, supported by comparable company analysis using relevant trading multiples. If applicable, precedent M&A transactions can provide additional perspective. Always show sensitivity analysis and explain how you weighted each method to reach your target price.
Q: How long should a CFA Research Challenge report be?
A: The competition specifies page limits (typically 10-15 pages for the main report, plus appendices). Respect these limits strictly; judges view page limit violations negatively. Focus on quality over quantity. Every page should advance your investment thesis. Use appendices for detailed model outputs and supporting analysis.
Q: What do judges look for in the CFA Research Challenge?
A: Judges evaluate: clarity and conviction of your investment thesis, quality of industry and company analysis, rigor of your financial model and valuation, realistic assessment of risks, professional presentation quality, and your team’s ability to defend your analysis under questioning. Differentiated insight and intellectual honesty stand out.
Q: Where can I learn equity research and valuation skills?
A: Valuation Master Class offers practical training programs where you’ll analyze real companies and build professional-grade valuation models. Choose your track: Starters for those beginning their finance career, Advancers for mid-career professionals, or Switchers for career changers entering finance.