mnieman

Assume that the stock’s fair value is 100. If the expected return is 14%, the fair value next year is 114. Assume further that the stock is currently undervalued at 90.
“The only thing we know for sure is that if the stock is expected to be properly valued at the end of the year, the expected HPR  14%”
So, in order for the stock to be properly valued at the end of the year, the price has to go up to 114. Since (114-90)/90  14%, the expected HPR has to be  14%.