You were determined to work at the capital market already in your student years. What attracted you to the market?

When I went to university, I knew that my future job had to be a decision-making position, requiring analytical skills and continuous learning. Therefore, in my second year of Management at the University of Gdansk, I chose specialisation in investments and wrote my bachelor’s thesis on valuation of Lotos. I enjoyed this exercise and became interested in the stock market. Unfortunately, there were not many job opportunities related to the capital market in Tricity, so I started working in controlling at a real estate developer, but soon realized that I needed a more dynamic environment. I moved to the Warsaw School of Economics (SGH) for my Master’s studies, started looking for a job and preparing for the Investment Advisor exam. I then found an ad for a junior position at ING Securities and that is how we met.

You are an equity analyst – please tell us what this job involves and how an average day looks like for an analyst working in a brokerage house?

The analyst’s working day starts quite early, sometimes even before 7:00 a.m. At the beginning of the day we prepare the daily bulletin and news comments concerning e.g. quarterly results. Later, we have a meeting with sales traders, where we discuss and quantify newsflow in our sectors. Further in the day, we attend meetings with companies, prepare recommendations and present investment ideas to clients.

You have mentioned a lot of interesting aspects – let’s start with the quarterly results comments. What key aspects of these results should an analyst take into account? When can we say that the financial results were good or bad?

It very much depends on the sector. It is important to what extent the results differ from our expectations, what the implications for the following quarters are and what the quality of the results is. We also adjust the results for any non-cash events, non-recurring items or creative accounting.

A great deal of knowledge and experience is needed to analyse financial statements, particularly if this is done under time pressure – as is the case during the results season (the period of time during which listed companies publish interim results). Is it common to find creative accounting in financial statements?

Very common. Unfortunately, accounting standards allow a high degree of flexibility, and even audited financial statements sometimes do not show the true picture of a company’s financial standing. An example of this is the GetBack case. I also know some examples of companies which had significant off-balance-sheet liabilities which they did not disclose because auditors did not require them to do so. Companies also often change their accounting policies and restate historical data. Sometimes the amount of cash is the only reliable number, although there are ways to „boost” this item as well.

In addition to financial statements, companies also publish a management report on operations, which is, in simple terms, a form of summary and commentary made by the board on results achieved. What good practices in these materials would you highlight and which should become a thing of the past?

It is good practice to provide additional data in order to allow a better understanding of the company’s business and outlook for the coming quarters, such as volumes, market share, backlog or plans for the following quarters. Sometimes however a management board’s report includes just a simple description of numbers in the financial statement and there is no added value in it.

You have already mentioned that part of an analyst’s job is to create reports and recommendations for listed companies. What do they contain? How long does it take to produce such a report?

Recommendations usually include analysis of the company’s business model and strategy, market analysis, as well as forecasts and valuation. The risk section is also very important. It can take more than a month to initiate on a new company, especially in case of an IPO (Initial Public Offering) report.

We already know that part of the report is the valuation of the company. What valuation methods are most commonly used on the Polish market and what are their characteristics? If an analyst issues a “buy” or “sell” recommendation, do prices react immediately?

The most commonly used valuation methods are the DCF model, which involves discounting cash flows projected for subsequent years and peer comparison, which shows value of a company in relation to the market valuation of other companies in the sector.

The fact that a valuation implies an upside or downside potential does not mean that shares of the company will fall or rise once the recommendation is issued. The analyst’s scenario has to materialize or the market has to realise that the scenario is not yet discounted in the share price.

An equity analyst’s job is not only to work with reports and valuation models, but also with people. You have to maintain relations with investors and with companies. Let us focus on the latter – how do management boards react to “buy” recommendations and “sell” recommendations?

I once heard unkind comments from a CEO of a company on which I had a 'sell’ recommendation, and for a while I was not invited to their quarterly conferences. In most cases, however, the reaction of management boards is more balanced – they say, for example, that they will try to surprise me positively or convince me to change my mind. In the case of „buy” recommendations, they often express surprise that the growth potential is not higher. On the other hand, there were few cases when the management board admitted that my assumptions might be too optimistic.

You talk to and know many management boards of listed companies. What actions, manner of communication or character traits distinguish the people on boards who are considered trustworthy?

In my opinion, consistent and transparent communication strategy is the key, as well as publication of realistic targets and then delivering on them. I also appreciate when management can admit that it has not met investor expectations and at the same time announce what it plans to do in order to improve performance in the future.

Apart from your professional work, you are also involved in social campaign. You are one of the co-founders of 30% Club Poland, for which I thank you very much. Is the low share of women on corporate boards noticeable in the work of an equity analyst? Are there any consequences of this phenomenon?

I think the numbers speak for themselves – according to ‘Women on boards and company performance’ report, more diverse companies listed on the WSE had statistically significantly higher net margins and lower share price volatility in the years 2015-19. Also, from my own observation, it seems to me that a more diversified management and supervisory board – not only in terms of gender, but also in terms of relations with the main shareholder or experience – translates into better decisions.

Looking from the perspective of years spent in our domestic capital market, how important a change in the market will the inclusion of ESG criteria in analytical reports and evaluation of companies be?

Until a few years ago, the market focused primarily on „G” – governance, applying a premium to stocks with better corporate governance and a discount to those with poor corporate governance. Now the market is gradually starting to also take into account 'S’ and 'E’ – buy-side is partly forced by regulations and, in the case of 'E’, also due to rising CO2 prices. There are also more and more investment managers who exclude investing in companies with exposure to, for example, coal, crude oil or weapon manufacturing. I believe in the future, companies with low ESG ratings will have a real problem obtaining financing and will be valued low on the stock market.

You also recently became a mum, how has parenthood affected your work?

I was afraid of a gap in my professional development, and at the same time my husband and I wanted to share the care of the child as equally as possible – so I took 6 months of maternity leave, and my husband took another 6 months. Based on our experience, it is clear that it is a myth that the mother is more important for a small child than the father, and that is why she should stay at home with the child – preferably until kindergarten. After the maternity leave, I returned to full-time work. Sometimes I am tired after a sleepless night, but on the other hand, parenthood is also an accelerated course in multitasking, project management and divided attention skills. At the same time, it is only now that I realise how harmful gender stereotypes begin in early childhood – some people think that a boy should only play with balls and cars, while a girl should learn empathy, which is why dolls are only for girls.

Beata, thank you very much for this conversation and sharing your experiences!