DEFINITION of 'Channel Check'

Channel check is a method of independent stock analysis whereby company information is supplied by examining the company's distribution channels. Clients of the subject company are interviewed to see whether their use/purchases of the subject company's product or service has changed, increased or decreased. The distribution channel companies are also interviewed as to their perspective on how competitive the subject company's product is in the current environment and how their pricing compares. This information is then used to formulate an estimate for the subject company's sales revenue for the coming year.

BREAKING DOWN 'Channel Check'

Channel checks are most often conversations or personal research done by researchers or third-party information providers with direct managers of businesses within a sector or industry that utilizes the subject company's product. Many times, when stock analysts provide ratings for specific companies, the company being analyzed supplies the information that is used. When doing a channel check, the analyst is using information that is not supplied by the company because he or she is independently investigating the company's financial health. Channel checks have come under scrutiny in recent years as regulators question whether such research should be considered inside information, or just personal research.

Example of a Channel Check

For example, ABC Widgets, Inc. is the subject company for Bert, a research analyst. Bert wants to check on ABC Widgets' clients/distribution channels to see how many widgets they're planning on ordering from ABC Widgets in the next year in order to project ABC Widgets' revenue. Bert calls Jack, a manager at ABC Widgets' largest client and asks him about their plans for continuing to do business with ABC Widgets and gets his opinion on how competitively ABC Widgets is positioned among widget suppliers. Bert is doing a channel check.

RELATED TERMS
  1. Channel

    A channel may refer to a distribution system for businesses or ...
  2. Hard Asset

    A hard asset is a tangible and physical item or object of worth ...
  3. Trading Channel

    A trading channel is a channel drawn on a security price series ...
  4. Construction Interest Expense

    Construction interest expense is interest that accumulates on ...
  5. Distribution Channel

    A distribution channel is a chain of businesses or intermediaries ...
  6. Descending Channel

    A descending channel is used in technical analysis to show a ...
Related Articles
  1. Trading

    Channeling: Charting a Path to Success

    Learn how to trade channels, a chart pattern that tells you where to enter, where to exit and even how long the trade may take.
  2. Trading

    Buy These Stocks on The Pullback (LEN, FNF)

    These four stocks are in upward sloping trend channels and have recently pulled back toward the bottom of the channel, providing a buying opportunity.
  3. Trading

    Trend Channel Buying Opportunity in These Stocks (ABBV, RTN)

    These stocks are rising within trend channels and flashing a buy signal with the price near channel support.
  4. Trading

    Rising Trend Channel Breakouts - Acceleration Or Top?

    These stocks have been within rising trend channels, but recently have broken the trend channel to the upside. Such a breakout usually signals two potential outcomes: an acceleration of the trend ...
  5. Investing

    Time to Buy These Stocks at Support

    These stocks are moving within well-established trend channels and have recently pulled back toward channel support, presenting a potential buying opportunity.
  6. Trading

    Explaining Buy Limit Orders

    A buy limit order allows traders and investors to specify the price that they are willing to pay for a security, such as a stock.
  7. Trading

    Trend Channel Stocks Near the Buy Point (WCN, MWA)

    These stocks are currently trading near the bottom of trend channels but moving higher, presenting a buying opportunity.
  8. Investing

    How Does Sling TV Work? (DISH)

    Looking for a way to cut the cable TV cord? Sling TV, which streams channels live, is a great deal if you can keep from adding a lot of the extra packages.
  9. Trading

    Microsoft Stock Breaks Out Into Triple Digits

    Microsoft shares traded above $100 for the first time last week and could add to gains in the coming months.
RELATED FAQS
  1. What's the difference between production cost and manufacturing cost?

    Learn more about fixed and variable expenses incurred by businesses. Find out how production and manufacturing costs impact ... Read Answer >>
  2. What is the difference between marginal benefit and marginal cost?

    Understand the difference between marginal benefit and marginal cost. Learn how and why both marginal cost and marginal benefit ... Read Answer >>
  3. How do traders and analyst create profitable Swing Trading strategies in forex?

    Learn how to create a profitable swing trading strategy in the forex market using price channels on bullish, bearish and ... Read Answer >>
  4. How is marginal revenue related to the marginal cost of production?

    Learn about the marginal cost of production and marginal revenue and how the two measures are used together to determine ... Read Answer >>
  5. Why is trading volume important to investors?

    Learn about trading volume, its importance and how investors analyze volume to confirm a trend or reversal in a security. Read Answer >>
Trading Center