4 - analysis Answer The analyst needs to consider several factors before recommending to buy the stock These includes • The economic condition

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5. RISK AND RETURN In an equity research report, an analyst calculates a forward earnings yield of 7% on a particular company common stock. Noting that this yield is higher than the 5% yield on a 10-year Treasury, the analyst reports a buy recommendation for the common stock and no favorable recommendation, just based on “yield”, for the Treasury bond. Question: Is this a balanced view? Could the analyst be making a mistake in his/her
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Unformatted text preview: analysis? Answer: The analyst needs to consider several factors before recommending to buy the stock. These includes: • The economic condition • Risk associated with the investment • The market condition of the industry of which stock is being purchased • The analysis needs to be done in consistent to the present value valuation methods. • Investigate the intrinsic value of the stock....
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This note was uploaded on 09/08/2011 for the course ACCOUNTING 101 taught by Professor Bayne during the Winter '10 term at University of California, Berkeley.

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