Recommendation structure and definitions
department operates with 5 recommendation categories based on expected absolute
return for the security 12 months forward. The absolute return includes share
appreciation and dividend yield combined.
Strong Buy: The absolute
return is estimated to be in excess of 15%
Buy: The absolute return is estimated between 5% and 25%
Neutral: The absolute return is estimated between 0% and 10%
Reduce: The absolute return is estimated between 5% and -10%
Sell: The absolute return is estimated to be less than -5%
Share price target: All share price targets are based on a 12 month horizon
Model for value evaluation
department bases the recommendations on a variety of standard valuation models.
Shares are commonly valued on a DCF-basis, except financial companies.
Price-to-book value relative to long term historical empirical averages and/or
relative to Return on equity are commonly deployed as are Net Asset Value
models for companies with liquid markets for their assets. Shorter-term
considerations are often included in the form of relative Price-to-Earnings
ratios and Enterprise Value-to-Earnings before amortization, depreciation,
interest and taxes.
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