Category: Money Tips Date: 2007-04-25
Company's valuation method is fundamental analysis of listed companies, an important weapon in the "fundamental decision to value, value prices to be determined" basic logic, by comparing the company's valuation method derived from theory of the firm stock price and market price differences, and thus guide Investor specific investment behavior.
Company valuation methods two main categories, relative valuation method, which is characterized mainly uses the multiplier method is simple, such as the PE valuation method, PB valuation method, PEG valuation, EV / EBITDA valuation of France. And those for the absolute valuation method, which is characterized mainly uses the discount method, more complicated, such as discounted cash flow method, option pricing methods.
Relative valuation method and the "Five Golden Flowers"
Relative valuation method because it is simple to understand, easy to calculate but has been widely used. But the fact is the relative valuation of each method has its own scope of application of a certain, not applicable to all types of listed companies. At present, there are a variety of relative valuation misappropriation and misuse, as well as the situation has been shallow, the following on in the most commonly used PE as an example speak for themselves.
Is generally understood, P / E value is lower, the company the greater the investment value. Therefore, in P / E value of low involvement, higher investment in throwing is more in line with the logic. But in fact, that by the end of 2004 because of "Five Golden Flowers" P / E value is relatively low, the company has investment value and investors involved in now, "countless losses" inevitable. On the contrary, "anti-P / E" method is the average return of investors is quite good, that is the end of 2001 P / E value is higher involvement, "Five Golden Flowers" of investors, by the end of 2004 P / E value is lower before the throw. So, why not? In fact very simple reason is that PE law does not apply to "Five Golden Flowers," a category with a strong cyclical industry, listed companies.
On the other hand, most investors only care about PE value itself changes and comparison with historical value, PE valuation method's logic is seriously shallow. Logically, PE valuation method, an absolutely reasonable price P = EPS �P / E; stock determined by EPS and reasonable P / E value of the product. Under the other conditions remain unchanged, EPS growth rate forecast for the higher and reasonable P / E values will be higher, there will be absolutely reasonable price rose; high EPS growth stocks have high and reasonable P / E �low-growth stocks have low a reasonable P / E. Therefore, when the lower than expected EPS growth rate of real time (smaller multiplicand), a reasonable P / E value is lower (smaller multiplier), the multiplier effect, under a double blow to small, share prices tumbled and vice versa empathy. When the company's actual growth rate is higher or lower than expected, the share prices soar or plunge, investors often shouted "Up (down) were people can not read" or "Bu Zhiyu up (down) so much to" . In fact is not surprising, PE valuation method the multiplier effect at work only.
Redundancy America's absolute valuation method
The absolute valuation method (discounting methods) and relative valuation method is almost the same time, introduced into China, but has been in the embarrassing position of marginalization, absolute valuation method has been considered a "theory though perfect, but the practicality poor", mainly because of : (1) China's listed companies related to the relative lack of basic data to obtain an accurate model parameters is more difficult. Untrusted data into the model, the poor get reasonable results, and thus absolute valuation method of the model itself to generate confidence shaken and suspicion; (2) China's listed companies are less than the outstanding shares of capital stock 1 / 3, and arises from valuation model developed basic assumption of full circulation does not match.
However, since 2004 the absolute valuation method marginalized have been greatly improved, mainly because: the industry structure of China's stock market class, the upper reaches of the main industrial sectors, especially energy and raw materials, highly cyclical. Since May 2004 the macro-control to make up the economy during the cyclical nature of the original widely-used "TOP-DOWN" research methods (macro-economic analysis - the industry to judge the economy - the leading company's profit forecast) and the importance of the decline; while in a cyclical prospects have declined, the relative valuation method to evaluate using traditional methods can not explain the company's share price and the intrinsic value of a serious departure from the context, "sub-sectors, select stocks" rise in the importance of research methods, the company began to gradually absolute valuation method has cropped up .
In particular, since 2005, China's tradable shares step by step to solve the problem started. Tradable shares is resolved, the next full circulation in the context of the value of China's listed companies, by an absolute valuation method to estimate the value of increased reliability, and further impetus to investors, especially institutional investors, the absolute valuation concerns.
The absolute valuation law, DDM model is the most basic models, the most mainstream of the DCF law also draws heavily on DDM some of the logic and methods of calculation. In theory, when the company's free cash flow used exclusively for dividend payments, DCF model and DDM model is not fundamentally different; but a matter of fact, whether in China or the lower dividend rate of dividend rates are relatively high in the United States, dividends can not equivalent to the company free cash flow, for four reasons: (1) stability requirements, the company uncertain future ability to pay high dividends; (2) the need for the future to continue to invest, the company expects a possible future capital expenditures, to retain the cash financing to eliminate the inconvenience and expensive; (3) tax factors, the higher the implementation of a progressive system of foreign capital gains tax or personal income tax; (4) signal characteristics, the market prevail "companies increased dividends, the prospects can look at the high line; Dividend decreased, indicating that the company will remain bearish "view. China's listed companies profit-sharing ratio is not high, dividend ratio and the number does not have the stability in the short term the situation would hardly improve, DDM model in China has basically does not apply.
DCF is currently the most widely used valuation method provides a rigorous analytical framework for systematic consideration î–?affect the value of a final assessment of each of these factors î–?a company's investment value. DCF valuation method and the DDM is the difference between the nature, DCF valuation method to use free cash flow alternative to dividends. Free cash flow (Free cash flow for the firm) is an American scholar Rappaport proposed that the basic concept for the company resulting in the re-investment needs to meet after the surplus, does not affect the company under the premise of sustainable development, and for corporate capital providers (that is, a variety of interests and demands of people, including shareholders, creditors), the distribution in cash.
Appropriate two-sided coin method
The author believes that the relative valuation method and absolute valuation method for the two sides of a coin, there is no better either problem. Different valuation methods apply to different industries, different financial companies, for different companies to analyze specific issues and carefully choose to take a different method of valuation. A variety of comparative law at least one of the absolute valuation and the valuation model for the valuation method (in DCF-based) may be used in combination to achieve fairly good results. For example: highway listed companies, focusing on stability, the preferred DCF method, the second best EV / EBITDA; bio-medicine and Internet software development companies, focusing on growth, preferred PEG method, the second best P / B, EV / EBITDA; Real Estate and business and hotels, listed companies, focusing on assets (real estate, etc.) the book value and the actual value of the difference may be caused to the company or proceeds should be used RNAV method and the method of combining wears PE; resource companies, in addition to concern about production, we must also concern about the ownership of mineral resources should be used in option pricing (Black-Scholes) model for model.
In the current cyclical industry (the main stock market) decline in the context of the economy, investors should strengthen the valuation method of absolute knowledge and understanding, through the relative method and absolute method combined with the use, to enable investors to analyze the company's fundamentals to consider when î–?both At present the company's financial status, product structure, business structure î–?also consider the future development of the industry and the company's strategy, to understand the value of the company's future continuous, and thus form a comprehensive understanding of the company to make more rational investment judgments.
