How can the analyst’s valuation process foster the development of an appropriate stock recommendation?

Abstract

The effective investment research report suggests that five steps of the valuation process be required in order to obtain a successful investment decision that the valuation task could bring. Thus, this analysis suggests that following this process, a risk-adjusted DCF valuation model is developed and that we should perceive appropriate target price and stock recommendation as a result along with the valuation task. DCF valuation modeling requires numerous assumptions in estimating the intrinsic value combining valuation models and comparing this value to the market price of the firm’s stock, correcting possible mistakes and improving efficiency. The results may help to improve the understanding of analysts’ valuations, both expected and perceived. The findings also suggest that the information of an effective investment research report should be a crucial stage in the valuation step and can help us to address issues such as how analysts use financial information to generate valuations and stock recommendations.