skills/initiating-coverage/references/sector-overlays.md

# Sector Overlays

Use `sector-context-overlay` to avoid generic public-company analysis when the issuer matches a supported sector lens.

## SaaS / software

Key metrics:
- ARR, subscription revenue, RPO/cRPO, billings,
- net revenue retention, gross retention, churn,
- CAC payback, LTV/CAC, sales efficiency,
- gross margin, free cash flow margin,
- rule of 40, magic number,
- enterprise vs SMB mix,
- seat vs usage vs transaction pricing.

Red flags:
- billings deceleration masked by revenue recognition,
- NRR decay,
- rising CAC payback,
- customer concentration,
- deferred revenue weakness,
- stock-based compensation dilution.

Valuation:
- EV/revenue, EV/gross profit, FCF yield, DCF for mature names.

## Banks

Key metrics:
- NII, NIM, deposit beta, loan growth,
- credit costs, NCOs, reserves, criticized loans,
- CET1, tangible common equity, RWA,
- efficiency ratio, fee income,
- TBV/share and ROTCE.

Red flags:
- deposit mix deterioration,
- commercial real estate exposure,
- unrealized securities losses,
- reserve underbuild,
- capital return constraints.

Valuation:
- P/TBV vs ROTCE, excess capital, dividend/buyback capacity.

## Insurance

Key metrics:
- premiums, combined ratio, loss ratio,
- reserve development,
- investment income,
- book value growth,
- capital adequacy and catastrophe exposure.

Valuation:
- P/B, P/E, ROE, embedded value where relevant.

## REITs

Key metrics:
- NOI, same-store NOI, occupancy,
- leasing spreads, rent growth,
- AFFO/share, payout ratio,
- NAV, cap rates,
- debt/EBITDA, secured debt, maturity schedule.

Red flags:
- tenant concentration,
- lease rollover cliffs,
- refinancing costs,
- capex leakage,
- cap rate expansion.

Valuation:
- NAV, implied cap rate, AFFO multiple, dividend yield.

## Energy / E&P

Key metrics:
- production, realized prices, lifting cost,
- decline rate, inventory depth,
- capex, FCF, hedges,
- reserves, finding/development cost,
- leverage and shareholder returns.

Valuation:
- EV/EBITDA, FCF yield, NAV, reserve value.

## Biotech

Key metrics:
- pipeline stage, trial design, endpoints,
- probability of success,
- TAM and peak sales,
- launch curve, patent life,
- cash runway and dilution.

Red flags:
- underpowered trial,
- weak endpoint relevance,
- financing overhang,
- binary event risk,
- competitive standard-of-care shift.

Valuation:
- rNPV, probability-weighted DCF, sum of pipeline assets.

## Consumer / retail

Key metrics:
- comparable sales, traffic, ticket,
- units, pricing, mix,
- gross margin, inventory, promotions,
- store growth, digital mix,
- loyalty/retention metrics.

Red flags:
- inventory build,
- promotional intensity,
- traffic deterioration,
- channel mix margin dilution,
- consumer credit stress.

Valuation:
- P/E, EV/EBITDA, FCF yield, DCF for stable names.

## Industrials / business services

Key metrics:
- organic growth, backlog, book-to-bill,
- price/cost, utilization,
- segment margins,
- working capital,
- M&A contribution,
- cycle exposure.

Red flags:
- order slowdown,
- margin lag from input costs,
- integration issues,
- project delays,
- customer concentration.

Valuation:
- EV/EBITDA, P/E, FCF yield, SOTP.

## Exchanges / financial infrastructure

Key metrics:
- volumes, open interest, take rate,
- data and analytics revenue,
- clearing revenue/risk,
- market share,
- operating leverage,
- regulatory risk.

Valuation:
- P/E, EV/EBITDA, FCF yield, DCF for durable compounders.