WOW - analyst ratings, page-4

Mechanic - actually, the analysts at this level do provide their models - to institutional clients. Some even go so far as to provide full access to their model spreadsheets with all variables.

For the target prices it is usually a layered valuation compiled of Bear Case, Base Case and Bull Case. In this example, MS have used the 3 scenario's as seen below:

Price Target Price Target A$17
DCF with 8% WACC based on 5% risk-free rate, 0.9 equity beta, 30% net debt to total capital ratio, and 3% terminal growth.

Bull A$24
22x base case FY17e EPS 22x base case FY17e EPS Margins remain relatively flat: Woolworths' Aus F&L EBIT margins remain relatively stable, declining to 6% in the long term from 8% in FY15, with price investment offset by faster top-line growth and cost fractionalization.

Base A$17
15x base case FY17e EPS Margins gradually rebase: We project Aus F&L EBIT margins decline from 8% in FY15 to 4.1% in FY17, as top-line growth is not enough to offset price investment, and then margins slowly increase to 4.5% in FY20 as they settle at a more sustainable level.

Bear A$12
11x base case FY17e EPS 11x base case FY17e EPS The slope gets slippery: Price investment is met with similar price investments by competitors, such that margins decline to 3.5% by FY20 and LFL sales growth remains flat.