Two analysts model the same company on the same day. One publishes a Buy at $80. The other publishes a Sell at $45. Same financials, same industry, different assumptions. Knowing where they diverged is the skill the exam tests.
A complete report is a structured document that walks the reader from business understanding to investment conclusion. The exam expects you to recognize what is present and what is missing.
The standard elements:
- Summary and recommendation. Buy/Hold/Sell, target price, forecast horizon (typically 12 months), expected return.
- Business description. Products, services, customers, geographic mix, revenue segments, business model.
- Industry overview. Market size, growth, structure, regulatory backdrop, key drivers.
- Competitive analysis. Porter-style framework, market share, moat sources, peer comparison.
- Financial analysis. Historical results, common-size statements, ratio trends, quality of earnings.
- Forecasts. Pro-forma income statement, balance sheet, and cash flow over the explicit forecast horizon.
- Valuation. Method used (DCF, multiples, residual income, asset-based), key assumptions, target price derivation, scenario or sensitivity analysis.
- Risks. Operating, financial, regulatory, competitive, ESG. Each named risk must be tied to the thesis it threatens.
Common mistakes
- Treating sell-side and buy-side as defined by the conclusion direction. They are defined by audience and distribution, not by Buy vs Sell. A buy-side analyst can recommend selling a position. A sell-side analyst can issue a Sell rating (rare, but possible). Trap: "Buy-side issues Buy ratings, sell-side issues Sell ratings."
- Listing only the recommendation as the deliverable of a research report. A target price is one element. Industry analysis, competitive position, financial forecasts, valuation method, key assumptions, and risks must all be present. Trap: judging report completeness by whether it has a clear Buy/Hold/Sell.
- Attributing valuation divergence to the model. When two analysts using DCF reach different values, the model is not the source. The inputs are. Trap: "Analyst A used DCF and Analyst B used a different DCF."
Bottom line
- A complete research report covers company description, industry analysis, competitive position, financials, forecasts, valuation, risks, ESG, and a clear recommendation with target price
- Sell-side analysts publish to brokerage clients and the public; buy-side analysts write internally for their firm's portfolio managers and rarely publish externally
- Two analysts using identical models reach different values because revenue, margin, capex, and capital structure assumptions compound across the forecast horizon, the inputs differ, not the method
- Forecasts rest on four assumption families: revenue, profitability, investment, and financing, and all four are testable
Exam shortcut
For report completeness, run the nine-item checklist: business, industry, competitive, financial, forecast, valuation, risks, ESG, thesis. Missing any of those is exam bait. For sell-side vs buy-side, remember that "side" describes the firm's role in the trade, not the direction of the recommendation. For valuation divergence, work the four families in order (revenue, profitability, investment, financing). The answer is always one input, never the method.
The full lesson (about 2,068 words, 14 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- equity analyst research reports
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