Sector-Specific Analysis

Sector classification, key metrics by industry, industry life cycle, competitive dynamics — frameworks for sector-level equity analysis.

When to Activate

• Analyzing a company within its sector context
• Identifying sector-specific KPIs and valuation metrics
• Comparing companies across an industry peer group
• Assessing industry structure and competitive dynamics
• Evaluating where an industry sits in its life cycle
• Porter's Five Forces analysis for a specific sector
• Screening for sector investment opportunities

Core Concepts

Sector Classification (GICS)

The Global Industry Classification Standard (GICS) provides a four-tier hierarchy:

• 11 Sectors > 25 Industry Groups > 74 Industries > 163 Sub-Industries

Sector-Specific Key Metrics

Banking:

Technology / SaaS:

Real Estate / REITs:

Insurance:

Retail:

Industry Life Cycle

                    Revenue Growth
                    ^
                    |        Growth
                    |       /     \
                    |      /  Maturity
                    |     / Shakeout \
Introduction       |    /            \____ Decline
   ___            |   /                    \
  /   \           |  /                      \
 /     \__________| /                        \
────────────────────────────────────────────────> Time

Porter's Five Forces by Sector

Framework application:

1. Threat of new entrants: Capital requirements, economies of scale, brand loyalty, regulatory barriers, network effects, switching costs
2. Bargaining power of suppliers: Supplier concentration, input differentiation, switching costs, forward integration threat
3. Bargaining power of buyers: Buyer concentration, price sensitivity, product differentiation, backward integration threat
4. Threat of substitutes: Relative price/performance, switching costs, buyer propensity to substitute
5. Rivalry among existing competitors: Number and size of competitors, industry growth, product differentiation, exit barriers, fixed costs

Sector examples:

Methodology

Sector Analysis Process

1. Define the sector boundary: GICS classification, value chain positioning, adjacent sectors
2. Map the industry structure: Key players, market shares, concentration (HHI), value chain
3. Identify key drivers: Demand drivers (GDP, demographics, technology), supply dynamics (capacity, barriers)
4. Assess competitive dynamics: Porter's Five Forces, competitive advantages by player
5. Determine life cycle stage: Growth trajectory, margin trends, consolidation signals
6. Select sector-appropriate metrics: Use metrics table above for the relevant sector
7. Build peer comparison: Rank peers on key metrics, identify outliers and reasons
8. Identify investment themes: Secular trends, disruption risks, regulatory changes
9. Valuation framework: Apply sector-appropriate valuation multiples, cross-check with DCF

Peer Comparison

1. Select 5-10 comparable companies (similar size, geography, business model)
2. Standardize financials (calendar year alignment, currency, accounting policies)
3. Calculate key metrics for all peers
4. Rank and identify quartiles
5. Analyze outliers: Why is company X above/below the peer median?
6. Assess premium/discount justification

Templates

Sector Scorecard

Sector: _______________     Date: ___________

Industry Structure:
  Market size (TAM):          € ____________
  Growth rate (5Y CAGR):        ____________%
  Top-5 market share:           ____________%
  HHI (concentration):         ____________
  Life cycle stage:           [ ] Introduction  [ ] Growth  [ ] Maturity  [ ] Decline

Porter's Five Forces (1=Low, 5=High):
  New entrants:       [_]
  Supplier power:     [_]
  Buyer power:        [_]
  Substitutes:        [_]
  Rivalry:            [_]
  Overall intensity:  [_]

Key sector metrics:
  Metric 1 (________): Peer median ____  Range ____-____
  Metric 2 (________): Peer median ____  Range ____-____
  Metric 3 (________): Peer median ____  Range ____-____

Peer Comparison Table

                    Company A    Company B    Company C    Median    Target Co.
Market cap (EURm)    _______      _______      _______    _______    _______
Revenue growth        ____%        ____%        ____%      ____%      ____%
Gross margin          ____%        ____%        ____%      ____%      ____%
EBIT margin           ____%        ____%        ____%      ____%      ____%
ROCE                  ____%        ____%        ____%      ____%      ____%
Sector metric 1       _____        _____        _____      _____      _____
Sector metric 2       _____        _____        _____      _____      _____
EV/EBITDA             _____x       _____x       _____x     _____x     _____x
P/E                   _____x       _____x       _____x     _____x     _____x
Dividend yield        ____%        ____%        ____%      ____%      ____%

Quality Gate

• Sector boundary is clearly defined (GICS or custom definition)
• Industry structure is mapped (players, market shares, value chain)
• Key demand and supply drivers are identified
• Porter's Five Forces analysis is completed with sector-specific evidence
• Life cycle stage is assessed with supporting data
• Sector-appropriate metrics are selected (not generic ratios)
• Peer group is relevant (comparable size, geography, business model)
• Peer metrics are standardized for comparability
• Investment themes are identified with catalysts and risks
• Sector valuation approach matches industry convention