Sector Analysis

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 | 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 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 | 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

Source & license

This open-source skill is cataloged on AgentStack and links to its original source — we do not rehost the code.

• Author: brainbytes-dev
• Source: brainbytes-dev/everything-claude-finance
• License: MIT

Install and usage instructions live in the source repository linked above.