Analysis On Investment Value Of Middle And Small-size Stock Panel Listed Company

The middle and small-size stock panel was launched in Shenzhen Stock Exchange (SSE) in June 2nd, 2004. The establishment of this panel has profound significance in the Chinese stock market history. It symbolizes the start of construction of Chinese multi-level capital market. It provides the middle and small-size domestic enterprises with approaches to raise capital in the stock market, and also provides domestic venture capital with channels to seek investment opportunities in the capital market. Currently middle and small-size companies export approximately 60% of total exported goods from China, and have become the growth point of domestic economic development. Generally the stocks in this panel have excellent quality and high growth potential. The growth enterprises are the future of economy. To hold growth stocks is to hold the future of the stock market. However, since the establishment of the panel, there has been great volatility in the price fluctuation. Several IPO stocks have undergone big price declining, with a few fallen under issue price. In fact, regardless of which country, in all middle and small-size enterprises, the superior enterprises are only one small part, the inferior enterprises also are one small part, and most enterprises are located between these two extremes. This paper uses finance and investment theory as the basis to perform study and analysis on the valuation of domestic middle and small-size enterprises in the stock market. Quantitative valuation analysis is performed based on large data sets, with both macroeconomic and microeconomic factors affecting stock prices taken into consideration. This paper first analyzes the fundamentals of the companies in this panel, and then performs study of the current macroeconomic environment of domestic stock market, Industry analysis is carried out later. after which we compare the performance with Shanghai Stock Exchange index, stocks in similar panels in Shanghai Stock Exchange and Hong Kong Stock Exchange. After the industry outlook and peer comparison, we use discounted cash flows, price/earning ratio, and growth stock valuation models to perform analysis and valuation for several stocks in this panel to come to an investment strategy, based on the conclusion of whether the stocks are over or under-valued. After thorough analysis of the middle and small-size panel of SSE, which represents all the middle and small-size enterprises in China, we come to the conclusion as following: they generally have good growth potential, sound financial conditions, better earning power, plenty of cash flow, and relatively low price/earning ratio. Thus they are generally under-valued.