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

In an equity research report, the valuation section most likely should:

The valuation section should explain the valuation model, its key inputs and the assumptions behind the recommendation. This transparency lets readers assess and challenge the conclusion, whereas an unexplained price target or one-sided assumptions would make the report less credible and less useful.

  1. Astate the price target without disclosing the method used
  2. Blist only the positive assumptions that support the rating
  3. Cexplain the valuation model, key inputs and assumptions behind the recommendationCorrect

Explanation

A good report makes the valuation transparent. Readers need the model, inputs and assumptions to judge the recommendation and replicate or challenge it. Hiding the method or showing only favorable assumptions weakens credibility and conflicts with the objective of the report.

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