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In an equity research report, an analyst calculates a forward earnings yield of 7% on a particular company

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Question

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 analysis?

 

Paper#35348 | Written in 18-Jul-2015

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