The coverage base of a company relates to the number of analysts who regularly publish research as well as investment opinions on (or in other words: who 'cover') this particular company.
Analysing the company or stock
Financial analysts who cover a company often use spreadsheets and financial software packages to analyse company data, as they try to find and highlight trends, and generate forecasts. Based on their analysis, analysts generate financial forecasts for all companies they cover. Using the results and outcome of these models, they write analyst research reports and make presentations. They usually also publish recommendations to buy, hold or sell a particular stock.
Being on the analyst's radar screen
Many companies tend to publish a list of analysts who cover the company's stock in the IR section of their corporate website.
Analysts who cover a certain stock often follow certain business sectors, which means analysts who cover your stock will also closely follow (listed and non-listed) peer companies.
The analysts obtain information, amongst others by studying public records and filings by the company, as well as by participating in analyst meetings and conference calls with company management and senior company staff members.
It is essential to ensure that analysts who ask and need information from the company get equal and same-time (access to) information, all based on the principles of 'fair disclosure'.
Large versus mid to small-cap company coverage
Large-cap companies, generally by nature better-known than smaller companies, often have a larger analyst coverage of their stocks than mid to small-cap companies. Larger analyst coverage is likely to result in higher trading volumes.
Some investors believe that a company with a relatively high or large analyst coverage would benefit from more investment activity than a company that is less 'covered'.
To increase liquidity and trading volumes, mid- and small-cap companies therefore often try to increase the analyst coverage base for the company, for example by trying to get closer to a certain broker.
On the other hand; certain value investors may focus (and buy) securities with low analyst coverage because these securities are less visible and could be undervalued.