Limited Functions of Analyst in Field of Appraisal of Stock Prices

Confronted by the mixture of changing facts and fluctuating human fancies, the securities analyst is clearly incapable of passing judgement on common-stock prices "generally."

There are , however, some concrete, if limited, functions that he "may" carry on in this field, of which the following are representative :

1. He may set up a basis for "conservative or investment" valuation of common stocks, as distinguished from speculative valuations.

2. He may point out the significance of :
(a) the capitalization structure; and
(b) the source of income
as bearing upon the valuation of a given stock issue.

3. He may find unusual elements in the balance sheet which affect the implications of the earnings picture.
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