With the development of the market economy and the improvement of the capital market, equity investment has become an important investment method. In equity investment, equity valuation and expected return analysis are crucial links. This article will focus on the concepts, methods, and applications of equity valuation and expected return analysis.
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1. Overview of equity valuation.
Equity valuation refers to the process of appraising the value of a company's equity. In equity investment, the valuation of the target company is a crucial part. By evaluating the equity value of the target company, investors can understand the company's market competitiveness, financial status, operating performance and other information, so as to make more informed investment decisions.
2. Equity valuation method.
1.Comparable company law.
The comparable company method is a method of valuing a target company by looking for comparable companies that are similar to the target company and using the financial data and valuation indicators of the comparable company. In the comparable company law, it is necessary to select comparable companies that are similar to the target company's industry, size, business model, etc., and analyze their financial statements to determine their valuation indicators. These valuation metrics are then used to value the target company.
2.Discounted cash flow method.
The discounted cash flow method is a valuation method based on discounted future cash flows. In this method, the target company's future cash flows need to be taken and the appropriate discount rate is selected to discount them to their current value. The discounted cash flow method is a commonly used equity valuation method for companies with stable cash flows and a promising future.
3.Market Approach.
The market approach is a valuation method based on market data. In this method, it is necessary to collect data on similar transactions in the market and analyze their transactions**, number of transactions, premiums, and other factors to determine the market value of the target company. The market approach applies to companies with active markets and comparable transactions.
3. Analysis of expected returns.
Expected earnings analysis refers to the assessment of the target company's future earnings. In equity investment, it is crucial to the future earnings of the target company. Through the evaluation of the target company's future earnings, investors can understand the company's growth potential, market competitiveness and other information, so as to make more informed investment decisions.
Fourth, the expected return analysis method.
1.Financial analysis.
Financial analysis is a method of analyzing expected benefits based on financial statements. In this method, the financial statements of the target company need to be analyzed to understand its financial status, operating performance, and other information. At the same time, it is also necessary to evaluate the market environment, industry trends and other factors of the target company to determine the expected value of its future earnings. The financial analysis method is suitable for companies with a stable financial position and a promising future.
2.Causal analysis.
Causal analysis is a method of analyzing expected returns based on cause and effect. In this approach, it is necessary to understand the development trends and competitive landscape of the target company's industry, and analyze the drivers of its future earnings. By analyzing the drivers of the target company's future earnings, it is possible to determine the expected value of its future earnings. Causal analysis is applicable to companies and industries that have a clear causal relationship.
5. Application of equity valuation and expected return analysis.
1.Applications in investment decisions.
Equity valuation and expected return analysis are important aspects of equity investment. By evaluating the equity value of the target company, as well as its future earnings, investors can more accurately understand the company's market competitiveness, financial status, operating performance and other information, so as to make more informed investment decisions.
2.Applications in enterprise value management.
Equity valuation and expected return analysis are important aspects of enterprise value management. Through the analysis of equity valuation and expected returns, we can understand the market value and potential development ability of the enterprise, so as to provide an important reference for the enterprise to formulate a more scientific and reasonable development strategy and business plan.
In short, equity valuation and expected return analysis are important aspects of equity investment and enterprise value management. Through scientific and reasonable equity valuation and expected return analysis, we can more accurately understand the market competitiveness, financial status, operating performance and other information of the target company, so as to make more informed investment and management decisions.