Introduction

Welcome to Equity Valuation Factors: the unit that teaches you the methods analysts use to determine what a stock is actually worth.

Exam Weight: Part of 17 questions

What You'll Learn

In this unit, you'll cover:

• Technical Analysis: Using price charts, volume data, and patterns to forecast stock price movements (without looking at the company's financials)
• Fundamental Analysis: Evaluating a company's intrinsic value through financial statements, ratios, and economic factors
• Dividend Discount Model (DDM): Valuing stocks based on the present value of expected future dividends using the Gordon Growth Model formula
• Discounted Cash Flow (DCF): The broader valuation framework that prices any security based on the present value of its future cash flows

Why This Matters

The Series 66 expects you to know which valuation approach fits a given scenario. Technical analysis answers "when should I trade?" while fundamental analysis answers "what should I buy?" The DDM and DCF models take fundamental analysis further by assigning a specific dollar value to a stock. Exam questions frequently test the distinctions between these methods and when each is most appropriate.

Let's start with the simplest approach: reading price charts through technical analysis.