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Basic Question 1 of 1

When an equity analyst tries to evaluate a company's common stocks, she should base her valuation estimations on (in full or in part):

I. Fundamental analysis based on financial statements.
II. Variables related to future prospects of the company.
III. The impact of a potential merger in the same industry.
IV. Stocks market prices in leading stock exchanges.
Check Answer Print

User Contributed Comments 7

User Comment
thalor Why not IV? Wouldn't P/E ratio comparison be valid?
actiger Why III?
giroth I am pretty sure IV should be taken into account, as it is the value of the stock in the marketplace.
vi2009 not IV because it should be key indices instead of general stock market prices.

III because merger could cause an impact on stock valuation...it's in the corporate finance module.
arudkov got me with q4(((
ba777 On IV I assume they mean the company in questions stock and not just general stock prices. Is this correct. Also they use plural so are they referring to say a multi listed stock such as a dual listed NYSE and LSE and floats? Or couldn't it be different classes of common such as A and B with different voting rights. I'm not sure the point they are trying to make with this question.
shash0678 Not IV since it mentions leading stock exchanges and not comparable stocks in the same market. A stock in market A (say NYSE) cannot be used as a comparable to value a similar stock in market B (say Germany)
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I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes

Barnes

Learning Outcome Statements

describe applications of equity valuation;

CFA® 2025 Level II Curriculum, Volume 3, Module 20.