In this workout, we're told there's an analyst has conducted some analysis on a company and use this to calculate a target price. We're asked what investment recommendation that's buy or sell we would expect the analyst to assign and what is the upside or downside potential? Let's take a look at the information. We're given. First of all, the analyst has calculated a target price of 6.8 and the company's current traded share price is 5.5. The target price exceeds the current share price by a significant margin so we would expect the analyst to assign a buy recommendation.

But what's the upside or downside potential here? Well, we calculate this as the percentage difference between the target price and the current share price. So we take the target price. Divide it by the current share price and deduct one and that gives us the percentage difference. So here there is upside potential of 23.6% This means that if an investor bought the shares at the current price and then the shares repriced to the target price the investor would walk away with a 23.6% investment return. I think they would be pretty happy with that result.