Equity valuation

Type :

Term papers

Pages :

29 pages

Format :

.doc

Published date :

04/06/2009

Category :

Economics & finance

Sub category :

Finance

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Summary :

Introduction
Security analysis and portfolio management
1. Concept of portfolio
2. Objectives of portfolio management
Equity valuation
Fundamental analysis
1. Macro economic analysis
Industry analysis
1. Industry life cycle
2. Company analysis
Technical analysis
Models in equity valuation
1. Dividend discount model
2. H model
Earnings multiplier approach
1. Determinants of the P/E ratio
Multiperiod valuation
1. Zero growth model
2. Constant growth model (Gordon Model):
Points to be considered (conclusion)

Abstract

equity shares can be described more easily than fixed income securities. However, they are more difficult to analyze. Fixed income securities typically have a limited life and a well-defined cash flow stream. equity shares have neither. While the basic principles of valuation are the same for fixed income securities as well as equity shares, the factors of growth and risk create greater complexity in the case of equity shares. As our discussion of market efficiency suggested, identifying miss-priced securities is not easy. Yet there are enough chinks in the efficient market hypothesis and hence the search for miss-priced securities cannot be dismissed out of hand. Moreover, remember that is the ongoing search for miss-priced securities by any army of equity analysts that contributes to a high degree of market efficiency. Fundamental analysts assess the fair market value of equity shares by examining the assets, earnings prospects, cash flow projections, and dividend potential. Fundamental analysts differ from technical analysts who essentially rely on price and volume trends and other market indicators to identify trading opportunities.