Explain risk and return, Explain RISK AND RETURN, the

Explain risk and return

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Reference no: EM13114441

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?

Reference no: EM13114441

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