Skip to content

CFA Level I · CFA Level I Exam · Equity Analyst Research Reports

A research report opens with a rating of "Buy" and a 12-month price target, followed by a business description, industry analysis, forecasts, valuation, risks and disclosures. A reader wants to assess whether the price target is credible. The reader should most appropriately:

The reader should examine whether the valuation inputs and forecasts are supported by the industry and company analysis. A rating is only a conclusion, and comparing the target with past prices does not test whether the underlying assumptions are reasonable.

  1. Arely on the rating, since it summarizes the analyst's conclusions
  2. Bcompare the target with the share price history in the appendix only
  3. Cexamine whether the valuation inputs and forecasts are supported by the industry and company analysisCorrect

Explanation

Credibility depends on whether valuation inputs and forecasts follow from the supporting industry and company analysis. The rating alone is a conclusion, and past prices do not validate a forward-looking target.

Did you get it right without looking?

One question tells you little. A timed set on Equity Analyst Research Reports shows your real accuracy, how long you take and where you lose marks.

Practise Equity Analyst Research ReportsFree diagnostic mock

More Equity Analyst Research Reports questions