Valuation and Forecasting

Function 3 carries the most weight on Series 86 because this is where research judgment becomes a recommendation. The analyst has to build financial projections, test assumptions, choose valuation methods, compare those methods with peers and history, and decide what catalysts or risks could change the future value of the company.

Read this chapter as the decision layer of the exam. Start with income-statement projections, then build cash-flow and balance-sheet discipline, relative valuation, intrinsic valuation, and catalyst-aware recommendation framing.

Series 86 valuation and forecasting lessons

In this section

• Series 86 Income Statement Projection Drivers
  Learn how Series 86 tests revenue, price, volume, mix, gross margin, operating expenses, D&A, interest, taxes, EPS, and income statement forecast discipline.
• Series 86 Cash Flow, Balance Sheet, and Model Integrity
  Learn how Series 86 tests working-capital forecasts, capex, sources and uses of cash, three-statement reconciliation, sensitivity analysis, scenarios, and model updates.
• Series 86 Relative Valuation and Key Metrics
  Learn how Series 86 tests equity value, enterprise value, P/E, P/B, EV/EBITDA, EV/sales, PEG, peer comparison, historical averages, leverage, and price-target ranges.
• Series 86 Intrinsic Valuation and Recommendation Framing
  Learn how Series 86 tests cost of capital, DCF, terminal value, DDM, economic profit, sum-of-the-parts valuation, takeout logic, price targets, and risk/reward.
• Series 86 Catalysts, Market Patterns, and Risk Perception
  Learn how Series 86 tests macro, political, company-specific, technical, shareholder, and risk-perception events that can change valuation and recommendations.