Introduction of common valuation methods of listed companies based on stock.

Company valuation methods are usually divided into two categories: one is relative valuation method, characterized by simple multiplier method, such as P/E ratio valuation method, P/B ratio valuation method, EV/EBITDA valuation method, PEG valuation method, share price-income ratio valuation method, EV/ sales income valuation method and RNAV valuation method; The other is the absolute valuation method, which is characterized by mainly using discount methods, such as dividend discount model and free cash flow model.

The cost-benefit ratio of P/E valuation method is a relative index reflecting the market's profit expectation of the company, which should be used from two relative angles. One is the relative change of expected cost-benefit ratio (or dynamic cost-benefit ratio) and historical cost-benefit ratio (or static cost-benefit ratio); Second, the company's cost-benefit ratio is compared with the industry average cost-benefit ratio.

If the price-earnings ratio of listed companies is higher than the price-earnings ratio of last year or the industry average price-earnings ratio, it means that the market expects the company's future earnings to rise; On the other hand, if the P/E ratio is lower than the industry average, it means that compared with peers, the market expects the company's future earnings to decline. Therefore, we should look at the cost-benefit ratio relatively, not that a high cost-benefit ratio is bad, but that a low cost-benefit ratio is good.

When the cost-benefit ratio method is used for valuation, the earnings per share of the evaluated company should be calculated first; Then according to the average cost-benefit ratio of the secondary market, the industry situation of the evaluated company (the cost-benefit ratio of the shares of the company in the same industry), the company's operating conditions and its growth. The cost-benefit ratio of non-listed companies is generally discounted according to the cost-benefit ratio of comparable listed companies; Finally, the valuation is determined according to the product of P/E ratio and earnings per share: reasonable share price = earnings per share (EPS)x reasonable P/E ratio.

Logically, under the price-earnings ratio valuation method, the absolutely reasonable stock price P = EPS× price-earnings ratio; The stock price depends on the product of earnings per share and reasonable price-earnings ratio. Other things being equal, the higher the predicted EPS growth rate, the higher the reasonable P/E ratio, and the absolutely reasonable share price will also rise. High EPS growth stocks enjoy high reasonable P/E ratio, while low growth stocks enjoy low reasonable P/E ratio. ..

Therefore, when the actual growth rate of EPS is lower than expected (the multiplier becomes smaller), the reasonable P/E ratio decreases (the multiplier becomes smaller), the double blow under the multiplier effect is smaller, and the stock price plummets. Therefore, when the company's actual growth rate is higher or lower than expected, the stock price often rises or falls sharply, which is actually the multiplier effect of the P/E ratio valuation method. It can be seen that the higher the cost-benefit ratio, the better, because it depends on the net profit. If the company's net profit is only a few hundred thousand or earnings per share are only a few cents, then a high cost-benefit ratio will only reflect the company's high risk, so be cautious in investing in such stocks.

From a practical point of view, we can think that only when the cost-benefit ratio is equal to or better than the growth rate of the company's ordinary earnings per share can we invest in the company's equity. This means that if a company's earnings per share growth rate is 10%, then you can only pay at most 10 times the earnings purchase price. This approach is based on the assumption that fast-growing companies are more valuable than slow-growing companies. This also leads to a consequence, that is, equity transactions with high cost-benefit ratio may not necessarily pay higher prices than those with low cost-benefit ratio.

The application environment of the cost-benefit ratio multiple method is that there is a relatively perfect and developed securities trading market, and there must be comparable listed companies, and the market correctly prices these assets at an average level. Because high-tech enterprises are very different from traditional enterprises in profitability, sustainable management ability, integrity and risk, we should pay attention to the flexible application of high-tech enterprises in different growth periods when choosing cost-benefit ratio method to evaluate enterprises.

The price-to-book ratio valuation method is the basis for estimating the company's stock price from the perspective of the company's asset value. For the valuation of stocks of banks, insurance companies and other companies, the P/B ratio analysis is more appropriate. When using the stock price to net assets ratio pricing method, the net assets per share of the company to be valued should be calculated according to the audited net assets. Then according to the average net share price ratio of the secondary market, the industry situation of the appraised company (the net share price ratio of companies in the same industry), the company's operating conditions and its return on net assets, etc. The net share price ratio of non-listed companies is generally discounted according to the net share price ratio of comparable listed companies; Finally, the valuation is determined according to the product of the net value ratio of the issue price and the net assets per share. The formula is: reasonable share price = net assets per share x ratio of reasonable share price to net assets (PB).

The price-to-book ratio valuation method is mainly applicable to companies whose intangible assets play a key role in their income, cash flow and value creation, such as banks, real estate and investment companies. These industries all have a common feature, that is, although they operate large-scale assets, their profits are relatively low. Enterprises with a large number of fixed assets and relatively stable book value in high-risk industries and industries with strong periodicity.

EV/EBITDA valuation method1980s, with the wave of leveraged buyouts, EBITDA was widely used by investors in the capital market for the first time. But at that time, investors used it as an index to evaluate the company's solvency. With the passage of time, EBITDA has been widely accepted by industry, because it is very suitable for evaluating some industries with huge upfront capital expenditure, such as nuclear power industry, hotel industry, property leasing industry and other industries that need long-term amortization of upfront investment. Nowadays, more and more listed companies, analysts and market critics suggest investors to use EBITDA for analysis.

At first, private capital companies didn't consider interest, tax, depreciation and amortization when using EBITDA, because they wanted to replace them with figures that they thought were more accurate. They removed interest and taxes because they wanted to use their own tax rate calculation method and financial cost algorithm under the new capital structure.

EBITDA does not include amortization and depreciation, because amortization includes the cost paid when acquiring intangible assets in previous accounting periods, rather than the current cash expenditure that investors are more concerned about. Depreciation itself is an indirect measure of past capital expenditure. After deducting depreciation from profit calculation, investors can pay more attention to the estimation of future capital expenditure rather than the sunk cost in the past.

Therefore, EBITDA is often compared with cash flow, because the difference between EBITDA and net income (EBIT) is two expenditure items that have no impact on cash flow, namely depreciation and amortization. However, regardless of the cash demand for replenishing working capital and replacing equipment, non-cash items that are not adjusted in EBITDA include bad debt provision, inventory depreciation provision and stock option cost. Therefore, EBITDA cannot be simply equated with cash flow, otherwise, it is easy to lead enterprises astray.

EV/EBITDA was originally used as the pricing standard for mergers and acquisitions, and now it has been widely used in company value evaluation and stock pricing. The company value here is not the asset value, but the commercial value, that is, how much you have to pay to buy a going concern company, which includes not only the valuation of the company's profits, but also the company's liabilities. Enterprise value is regarded as a more market-oriented and accurate company value standard, and its derived valuation indicators such as EV/ sales and EV/EBITDA are widely used in stock pricing.

PEG valuation method PEG is developed on the basis of P/E ratio valuation method, which is an index that combines the cost-benefit ratio with the growth rate of enterprises, and makes up for the deficiency of PE in estimating the dynamic growth of enterprises. In view of the instability of investment income and non-operating income of many companies, and the situation that some companies use investment income to manipulate the net profit index, for the sake of stability, the net profit growth rate can be replaced by the annual growth rate of pre-tax profit/operating profit/income/earnings per share.

The focus of PEG valuation is to calculate the security of the current stock price and predict the certainty of the company's future earnings. If PEG is greater than 1, the value of this stock may be overestimated, or the market thinks that the performance growth of this company will be higher than the market expectation; If PEG is less than 1 (the smaller the better), the stock price is undervalued.

Usually, the PEG of growth stocks after listing will be higher than 1 (that is, the P/E ratio is equal to the growth rate of net profit), or even higher than 2. Investors are willing to give them a high valuation, indicating that the company is likely to maintain rapid growth in the future, and such stocks are prone to exceeding the expected P/E ratio valuation.

Because PEG needs to judge the performance growth of at least three years in the future, instead of only using the profit forecast of the next 12 months, it greatly improves the difficulty of accurate judgment.

In fact, only when investors are sure to make more accurate predictions about the performance in the next three years or longer, the use effect of PEG will be reflected, otherwise it will be misleading. In addition, investors can't just look at the company's own pegged exchange rate to confirm whether it is overvalued or undervalued. If the PEG of a company's stock is 12 and the PEG of other companies with similar growth is above 15, then the PEG of this company is already higher than 1, but its value may still be underestimated.

Of course, we can't just talk about PEG valuation mechanically. It is also necessary to comprehensively evaluate the internal conditions of listed companies, such as the international market, the overall economy, government industrial policies, industry prosperity, hot spots in the capital market stage, different regions of the stock market, and the sustainability of earnings growth of listed companies.

Price-earnings ratio valuation method can be used to determine the value of stocks relative to past performance. The ratio of share price to income can also be used to determine the relative valuation of a market part or the whole stock market. The smaller the ratio of stock price to income (for example, less than 1), it is generally believed that the higher the investment value, because investors can pay less than the unit operating income to buy stocks.

The price-earnings ratio of stocks in different market segments varies greatly, so the price-earnings ratio is the most useful when comparing stocks in the same market segment or sub-market. Similarly, because operating income is not as easy to manipulate as profit, stock price income pays more attention to performance than cost-benefit ratio. But the ratio of share price to revenue can't reveal the whole operation, because the company may be losing money.

The ratio of share price to revenue is often used to evaluate the stocks of loss-making companies because there is no P/E ratio to refer to. In an era when almost all Internet companies are losing money, people use the ratio of share price to revenue to evaluate the value of Internet companies.

The advantage of P/S valuation method is that the sales revenue is the most stable and the fluctuation is small. And the operating income is not affected by the company's depreciation, inventory and non-recurring income and expenditure, which is not as easy to control as profits; There will be no negative income and no meaningless situation, even if the net profit is negative, it can be used. Therefore, the valuation method of stock price-earnings ratio can form a good supplement to the valuation method of cost-earnings ratio.

The shortcomings of P/S valuation method are: it cannot reflect the company's cost control ability, even if the cost rises and the profit falls, it will not affect the sales revenue, and the share price-income ratio remains unchanged; The ratio of share price to revenue will decrease with the expansion of company's sales revenue; Companies with large operating income have relatively low share price income.

EV/ Sales Valuation Method The stocks with high EV/ sales income have higher relative value. Based on EV/ sales revenue, give a score of 0 to 100. The higher the score of EV/ sales revenue, the higher the corresponding stock value. EV/ sales revenue calculated by price per share/sales per share can clearly reflect the potential value of companies listed on GEM, because in the increasingly competitive environment, the market share of companies plays an increasingly important role in determining their viability and profitability. EV/ sales revenue is an important index to evaluate the stock value of listed companies, and its basic model is:

The indicators are comparable: although the company's profit may be low or not yet profitable, the sales revenue of any company is positive, and the EV/ sales revenue indicator cannot be negative. So it is comparable.

The principle and usage of EV/ Sales are the same as those of P/S, which is mainly used to measure the value of a company whose profit rate is temporarily lower than the industry average or even at a loss, provided that investors expect the profit rate of this company to reach the industry average in the future.

The purpose of using sales revenue is that sales revenue represents market share and the size of the company. If the company can effectively improve its operation, it will reach the industry average or expected profit level. This indicator can only be used to compare companies in the same industry. By comparing and combining the expectation of performance improvement, a reasonable multiple can be obtained, and then multiplied by the sales revenue per share, the target price in line with the company value can be obtained.

RNAV valuation method RNAV is defined as net asset revaluation, and the calculation formula RNAV= (property area × average market price _ net debt)/total share capital.

Real estate area, average price and net debt are all important parameters that affect the value of RNAV. RNAV valuation method is suitable for real estate enterprises or companies with a large number of self-owned properties. Its significance lies in how much the company's existing property should be worth when it is sold at the market price. If the money spent on buying a company is less than the money received when the company sells its own property at the market price, it means that the company's stock is undervalued in the secondary market.

Analyze the market value of each asset of the company separately, and reinterpret the inherent long-term investment value of the company from the perspective of asset value. If there is a big discount between the stock price and its RNAV, it means that its stock price is obviously underestimated relative to the real value of the company. Higher asset-liability ratio (excessive long-term and short-term borrowing liabilities) and larger equity will reduce the value of RNAV.

DDM model is the most basic model in the absolute estimation method of DDM estimation method, and the most mainstream DCF method also draws lessons from some logic and calculation methods of DDM. Theoretically, there is no essential difference between DCF model and DDM model when the company's free cash flow is used for dividend payment. But in fact, whether in China with a low dividend yield or in the United States with a high dividend yield, dividends cannot be equal to the company's free cash flow for four reasons:

Stability requirements, the company is not sure whether it can pay high dividends in the future; In order to continue to invest in the future, the company expects that there may be capital expenditure in the future, and keeps cash to eliminate the inconvenience and expensive financing; Foreign progressive tax factors, capital gains tax or personal income tax; Signal characteristics, the market generally exists "the company's dividends are rising and the prospects are promising;"

The decline in dividends indicates that the company's prospects are not optimistic.

DCF valuation method DCF valuation method, which is widely used at present, provides a rigorous analysis framework, systematically considers every factor that affects the company's value, and finally evaluates the investment value of a company. The essential difference between DCF valuation method and DDM is that DCF valuation method replaces dividends with free cash flow.

The company's free cash flow was put forward by American scholar Rappaport. The basic concept is the cash generated by the company, which can be distributed by the company's capital suppliers (that is, various interest seekers, including shareholders and creditors) without affecting the company's sustainable development.

NAV valuation method NAV valuation is the net asset value method, which is the mainstream valuation method in the real estate industry at present. The so-called net asset value method refers to the net asset value (NAV) of real estate enterprises after deducting liabilities after discounting the cash flow of current reserve items under the assumptions of certain sales price, development speed and discount rate.

Specifically, the net asset value of the development property is equal to the discounted value of the net cash flow formed by the existing development projects and land reserve projects in the future sales process MINUS the liabilities; The net asset value of investment real estate is equal to the net rental income of the current project discounted at the set capitalization rate MINUS the value of liabilities.

The advantage of NAV valuation method is that it sets a valuation bottom line for enterprise value, which is especially suitable for many "real estate project companies" in China. Moreover, NAV valuation takes into account the expected price changes, development speed, investor return rate and other factors, which is more accurate than the simple cost-benefit ratio.

However, NAV valuation also has obvious shortcomings. It measures the value of the current tangible assets of the enterprise, regardless of the differences in brand, management ability and business model. The prevalence of NAV valuation has promoted the excessive worship of assets (land reserve) by real estate enterprises. Under the guidance of NAV, many real estate enterprises participated in the land reserve competition. Under the worship of NAV, real estate enterprises have formed a new survival mode: reserving land-increasing market value-financing-re-reserving land.