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	Key Characteristics	Primary Valuation
Energy	Commodity-driven, cyclical, capital-intensive	EV/EBITDA, P/CF, NAV
Materials	Commodity exposure, cyclical	EV/EBITDA, P/B
Industrials	Economic cycle sensitive, diverse	P/E, EV/EBITDA
Consumer Discretionary	Consumer spending sensitive	P/E, EV/EBITDA, EV/Sales
Consumer Staples	Defensive, stable demand	P/E, Dividend Yield
Health Care	Regulatory risk, pipeline value	P/E, EV/Sales (biotech), DCF
Financials	Spread income, regulatory capital	P/E, P/B, P/TBV, Dividend Yield
Information Technology	Growth-oriented, scalable	EV/Sales, EV/EBITDA, P/E (if profitable)
Communication Services	Mix of growth and value	EV/EBITDA, P/E, EV/Subscriber
Utilities	Regulated returns, yield play	P/E, Dividend Yield, EV/RAB
Real Estate	Asset-based, income-generating	P/FFO, P/NAV, Cap Rate, Dividend Yield

Sector-Specific Key Metrics

Banking:

Metric	Formula	Benchmark
NIM (Net Interest Margin)	Net interest income / Avg earning assets	1.0-3.0% (varies by region)
CET1 Ratio	CET1 capital / RWA	>12% comfortable
NPL Ratio	Non-performing loans / Total loans	<2% is healthy
Cost-to-Income	Operating expenses / Operating income	<50% excellent, <60% good
ROTE	Net income / Avg tangible equity	>10% value-creating
LDR (Loan-to-Deposit)	Gross loans / Customer deposits	80-100% typical
Provision coverage	Loan loss provisions / NPLs	>70% adequate

Technology / SaaS:

Metric	Formula	Benchmark
ARR (Annual Recurring Revenue)	MRR x 12	Growth rate > 30% is strong
NRR (Net Revenue Retention)	(Beginning ARR + expansion - contraction - churn) / Beginning ARR	>120% excellent, >100% good
DAU/MAU	Daily active / Monthly active users	>50% high engagement
CAC (Customer Acquisition Cost)	Sales & marketing / New customers	Payback < 18 months
LTV/CAC	Customer lifetime value / CAC	>3x healthy
Rule of 40	Revenue growth % + EBITDA margin %	>40% is strong
Gross margin	Gross profit / Revenue	>70% for SaaS
Magic Number	Net new ARR / Prior quarter S&M spend	>1.0 efficient

Real Estate / REITs:

Metric	Formula	Benchmark
FFO (Funds From Operations)	Net income + D&A - gains on sales	Primary earnings metric
AFFO (Adjusted FFO)	FFO - maintenance capex - straight-line rent adj.	Cash flow proxy
NAV (Net Asset Value)	Market value of properties - debt	Intrinsic value
Cap Rate	NOI / Property value	4-8% varies by property type
Occupancy Rate	Leased sqm / Total leasable sqm	>90% healthy
WALE	Weighted average lease expiry	>5 years = stability
LTV (Loan-to-Value)	Debt / Property value	<50% conservative

Insurance:

Metric	Formula	Benchmark
Combined Ratio	Loss ratio + Expense ratio	<100% = underwriting profit
Loss Ratio	Claims incurred / Premiums earned	Varies by line
Expense Ratio	Operating expenses / Premiums written	<30% efficient
Investment yield	Investment income / Avg invested assets	Depends on rate environment
Solvency II ratio	Own funds / SCR	>150% comfortable
Reserve adequacy	Actual claims / Estimated reserves	~100% adequate

Retail:

Metric	Formula	Benchmark
SSSG (Same-Store Sales Growth)	YoY sales growth for stores open >12 months	>3% strong
Sales per sqm/sqft	Revenue / Selling area	Varies by format
Inventory turns	COGS / Avg inventory	Higher = more efficient
Gross margin	Gross profit / Revenue	Varies widely (25-60%)
GMROI	Gross profit / Avg inventory	>2.0x target
Conversion rate	Transactions / Foot traffic	Higher = better
Basket size	Revenue / Transactions	Track trend direction

Industry Life Cycle

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

Stage	Growth	Margins	Competition	Investment Focus
Introduction	Low/negative	Negative (investment phase)	Few players, high barriers	Product development, market creation
Growth	High (>20%)	Expanding	New entrants, increasing	Market share, capacity
Shakeout	Slowing	Pressure	Consolidation, exits	Efficiency, scale
Maturity	Low (GDP-like)	Stable/optimized	Oligopoly, stable	Cash return, maintenance
Decline	Negative	Eroding	Exits, substitution	Harvest, restructure

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:

Force	Banking (High barriers)	SaaS (Network effects)	Retail Grocery (Low margins)
New entrants	Low (regulation, capital)	Medium (low capital, but network effects)	Medium (logistics, scale)
Supplier power	Low (depositors fragmented)	Low-Medium (cloud infra oligopoly)	Medium (branded goods)
Buyer power	Medium (switching costs)	Low-Medium (high switching costs)	High (price transparency)
Substitutes	Medium (fintech, BNPL)	Medium (alternative solutions)	Low (essential goods)
Rivalry	High (commoditized products)	High (winner-take-most)	Very high (price wars)

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