• The target price has a timeframe of no more than one year and is solidly based on DCF analysis.
• The target price is stated as a dollar figure and the upside/downside potential is quantified as a percent of the market price.
• The overview presents a clear value hypothesis and delineates at least three mutually exclusive lines of reasoning which support the position.
• The investment summary details each of the lines of reasoning from the overview distinctly.
• The investment summary supports the value hypothesis by explaining beliefs about the future.
• The investment summary explains how, why, and when you expect the market price to move to meet your target price.
• The financial analysis section thoroughly examines the company's past performance and uses this as a basis for assumptions.
• The discussion of financial analysis connects the lines of reasoning in the overview to specific inputs which drive the financial forecasts.
• Analytics such as ratios, growth, and common-size figures are used to compare historical performance to forecast performance.
• The financial analysis shows robust examinations (used in your forecasts) of revenue, cost structure, profitability, capital spending, working capital management, and leverage.
• The financial analysis is supported by components of the DuPont identity as well as other ratios, growth patterns and financial figures (scaled and monetized).
• Management's past performance and management's predictions of the future have been discussed and incorporated into the analysis.
• The valuation discussion supports the value hypothesis with many methodologies (ideally three DCF and three relative valuations).
• All valuation methods discussed consistently support the same position (buy/sell/hold).
• Proximity of the DCF results to one another suggest consistency in the reasoning behind forecast performance.
• The value resulting from each supporting method is stated and examined, including the inputs and outputs.
• Each supporting method is demonstrated to support the value hypothesis.
• Investment risks are identified and discussed in terms of how the target price you chose would change if circumstances turn out to be different than you predict.
• Sensitivity and scenario analysis are used to quantify potential for uncertainty in the target price.
• Sensitivity and scenario analyses consider factors of your own model (e.g. variation in beta or discount rates, terminal growth, etc.).
• Sensitivity and scenario analyses consider issues of corporate performance (e.g. revenue growth, variations in cost structure, choices of asset allocation, capital structure, etc.).
• Sensitivity and scenario analyses consider exogenous factors (e.g. economic outlook, changing competitive forces, legislation, emerging technology, etc.).