Improving Analyst Target Price Performance Through Enhanced Valuation Techniques

Abstract

This study focuses on the target price issue, it aims to improve the reliability of target price through the enhanced valuation techniques. Firstly, this study improves the target price reliability by enhancing the discount rate estimation method. Secondly, the concept of industry-specific combined valuation approach has been introduced by this study, this new concept not only takes advantage of the benefit from the combination of absolute and relative model, but also consistent with the distinguishing features of different industries. Thirdly, this study presents an enhanced target price setting method to improve the target price reliability, this method provides effective solutions to the common but unsolved question about how to combine a range of value estimates. Finally, a reliability testing method has been introduced by this study to measure the performance of value estimate and target price.

Keywords: Target Price Performance, Enhanced Valuation Methods

JEL Classification: G12, G14, C10