IROs are at best lukewarm about the sell-side analysts who follow their companies, according to a new report from IR Insight, the research arm of IR magazine.
The report – based on a survey of more than 1,000 IROs from around the world – finds 70 percent of respondents are ‘generally satisfied’ with the quality of sell-side coverage.
A separate finding shows 61 percent of respondents believe the role of the sell side will be as important in the future as it is now, with 23 percent and 16 percent believing it will diminish and grow in importance, respectively
Previous surveys showed IROs generally believing the quality of sell-side analysis was on the wane, so these latest findings suggest the decline is easing. Despite this, few participants view analysts very favorably.
The report notes the large volume of mildly positive opinion may be down to IROs unwilling to openly criticize sell-side analysts, wary of losing this vital audience. Even under the cover of anonymity, the majority refuse to voice negative views.
Wide range of sell-side quality
Some do speak openly, however, and their points echo current concerns over the quality of sell-side coverage. A prominent issue is the wide range of quality across the sell-side field. The respondents agree analysts can be split into three groups: excellent, mediocre and incompetent.
There is also serious concern over the time spent by analysts on background research. One IRO at a US energy company says: ‘It never ceases to amaze me how few analysts really take the time to do their homework.’
The output of research reports is also widely condemned. Due to a lack of diligence and engagement, these reports are often thin on the ground, lacking key analytical detail and frequently rehashed from press releases, say respondents.
There is some respite for sell-side analysts, however, with one respondent recognizing the difficulty in managing a heavy workload. ‘Sell-siders covering 25+ companies can’t do a good job on all of them so they cover only a couple of them well,’ says the head of IR at a US company in the telecoms, media and tech sector.
