Absolute Valuation Essay

Great Essays
PART – 1: EQUITY VALUATION

Executive Summary
Equity valuation is the determination of a company’s total value, which involves more than examining revenue and assets figures in the financial statements. Several financial indicators are taken into account for practicing equity valuation. It provides an accurate perspective, to the shareholders, creditors and prospective investors, of the company’s true value at any given time (Christensen &Feltham, 2009).The data point related to the value of a company are valuable for the stakeholders who need to determine the performance of the stock.
In investment and portfolio management, valuation is one of the most significant contributor. One needs to sell overvalued and buy undervalued securities to achieve high return on investment. Therefore, it is critical to evaluate the ‘intrinsic value’ (fundamental value or fair value) of a security (Koller et al. 2010).Stocks valuation are based on two models: Relative valuation models and Absolute valuation models. A Relative valuation model compares metrics and multiples of a firm with other companies within its relevant sector or industry. An absolute valuation model, based on an absolute estimate, values a firm with an intrinsic value. The absolute valuation models
…show more content…
(CL) is a multinational company based on consumer products. It is focused on Oral Care, Home Care, Personal Care and Pet Nutrition. According to the Annual Report of 2011, the company’s mission is to deliver superior shareholder returns and consistent business results by providing products to consumers globally, that make their lives more enjoyable and healthier. The business strategy of the company is closely defined to increase and develop positions in market leadership in key product categories. On their capacity to maximize, the strong global equities and organizations core competencies, the product categories are prioritized to deliver sustainable long-term growth (Annual Report,

Related Documents

  • Improved Essays

    The Equivalent Annual Annuity is a calculation of the annual cash flow of an annuity investment over its existence. These tools are essential for a financial manager to achieve his or her goals for a company to run efficiently. The primary roles of a financial manager are to warrant growth of the proprietor’s wealth and to ensure maximum profits a company. They make decisions on Capital Budgeting, Capital Structure and Working Capital Management, their importance to a company is vital in order for that company’s success. Using different methods and tools such as the Net Present Value (NPV), Discounted…

    • 854 Words
    • 4 Pages
    Improved Essays
  • Decent Essays

    Ratios related to financial decision process The table 2 below indicates three types of investment ratios and their implications. Fixed assets turnover is sometimes highly emphasized while making investment decision as it measures the relationship between fixed assets invested and profits generated, which may interest those investors and shareholders who have invested its property or fixed assets into the business and also it could be also significant to the financial manager as he may make an decision on external investment by investing the organization’s fixed assets outside. Debt to assets ratio is a financial indicator to measure the risk of the business. It highlights an important financial message to the financial manager and shareholders…

    • 816 Words
    • 4 Pages
    Decent Essays
  • Improved Essays

    Ranging from marketwide investments to component strategies investing in specific asset classes, each portfolio combines rigorous research into the underlying drivers of returns with efficient execution in complex markets.Dimensional’s marketwide strategies are designed to emphasize securities with higher expected returns and minimize unnecessary turnover, which helps reduce overall expenses. Highly diversified and efficient, these comprehensive solutions can serve as portfolio cores, simplifying investors’ equity allocation decisions. We build marketwide strategies that are broadly diversified across sectors, industries, and market capitalization segments. This helps manage risk and increase opportunities to add value.The component equity strategies managed by Dimensional focus on specific segments of the market to pursue higher expected returns. These strategies can be used to create a customized asset allocation or to supplement a marketwide strategy.…

    • 1070 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    Net Present Value Essay

    • 744 Words
    • 3 Pages

    Net present value (NPV) The net present value method is the delegate of a discounted cash flow method and the dynamic investment appraisal (Rudolf, 2008). It stand for the value increase to the business by the investment or the project ("Why Net Present Value Leads to Better Investment Decisions than Other Criteria", n.d.). It is evaluation is an effective method of economic evaluation of investments. (Erményi, n.d.). This measure demonstrate the difference between the costs and the benefits while considering the discounted values of them (Erményi, n.d.).…

    • 744 Words
    • 3 Pages
    Improved Essays
  • Great Essays

    This has empowered FICO score offices to assume a focal part in money related markets – a part that a few business analysts see as extreme. 4. (a) Define Fundamental Analysis and Technical Analysis; and (b) Discuss how they differ and how an investor works with both. A fundamental analysis: It tries to gauge stock costs on the premise of monetary, industry and friends measurements. Nonetheless, the most imperative factors considered in choosing stock costs are profit and profits.…

    • 1229 Words
    • 5 Pages
    Great Essays
  • Improved Essays

    Case Study SIP Investment or Lumpsum Investment? The concept of SIP and Lumpsum are the two modes of investment strategy that is followed by investors in the capital markets. SIP investments are maintained in a disciplined form in investment strategy where client is providing money according to the stipulated plan or contract. Lumpsum investment is followed by investing the entire amount into a chosen equity stocks or plan. Lumpsum investing strategy is mostly followed by the experienced investors those have the better understanding of the market and exposed to the current valuations of the stocks and can evaluate market behaviour.…

    • 1445 Words
    • 6 Pages
    Improved Essays
  • Improved Essays

    From an investor’s point of view, some of these capitals are more important than each other. An investor should also pay close attention to how the earnings per share of stock are reported as basic or diluted. Knowing the difference can make a big difference in their investments. Separation of Paid in Capital from Earned…

    • 719 Words
    • 3 Pages
    Improved Essays
  • Improved Essays

    First and foremost, FVA provides more relevant and timely information to the FS users, thus increasing the transparency of FS disclosure. FVA uses market selling price which are determined in competitive markets to measure the firm’s financial performance rather than based on historical cost. This allows shareholders to have a direct insight on the current value of the firm. Indeed, it provides relevant and latest financial information which reflect value and true economic substance to the FS users and functions like an early warning mechanism, allowing investors to exercise market discipline the earliest possible. When the FS’s transparency increases, market is said to be efficient, achieving semi strong form of EMH whereby company’s share price not only reflect historical information, but also all published information.…

    • 969 Words
    • 4 Pages
    Improved Essays
  • Superior Essays

    Additionally, some short term securities include treasury bonds, stocks, mutual funds, money market funds or even certificates of deposits, in which a company may use to earn quick cash. Some firms have a short term investment account, if their financial position is strong; whereas the company makes investments to gain a high interest, thus increasing its revenues (Gramlich et al, 2001). Arora et al (2014) says that over the long term, the uncertainty around the evolution of asset value will dominate the lack of precision in information. Gramlich et al (2001) added that short term debt causes long term debt ratios to shift in the opposite direction, if the current debt is classified as long term. A firm seeking to make a short term investment decision, will more than likely gain short bursts of cash or cash…

    • 1710 Words
    • 7 Pages
    Superior Essays
  • Superior Essays

    Many corporations and mathematicians use all type of research to gather enough evidence to get even close to the infamous swings. “An analysis is made of a variance measure which could improve the predictive validity of a classical historical variance estimate. Latane and Rendleman derived standard deviations implied in actual call option prices (ISDs) after assuming that investors price options according to the Black-Scholes model. Their results indicated that the approach is valuable, at least from a pragmatic viewpoint.” Becker’s, S. (1981). Becker’s refers that the prediction of stock values rely heavily on their reliance to standard deviations and the efficiencies of their historical variance measurements.…

    • 929 Words
    • 4 Pages
    Superior Essays