Listed Companies Of The Pharmaceutical Industry Valuation Methods

The valuation appraisal attracts more and more people's attention. It becomes the major reference of financial management and investment decision-making. In the mean time, it is a very effective evaluation tool of M&A and options trading. How to understand the value and measure the value have become the foundation and the premise of all economical and administrative action. At present, in the foreign countries with more developed capital markets, the business valuation theory and method system has become much more mature. But in China, the theoretical research of valuation is not deep enough and the methodology system is not perfect. At present, the main method of enterprise value assessment for domestic use are discounted cash flow method, the relative valuation method, options, pricing, etc. There are several technical limitations and the imperfections of theoretical system of many methods in practice except the discounted cash flow method. After many scholars' research and practice test, it is proved to suit with our enterprise value assessment much better.The pharmaceutical industry is closely related with national economy and people's livelihood. Besides, it is a key industry supporting by our government and it occupies an important position in the national economy. It is an industry which combines traditional industry with modern industry. In recent years, the scale effect of the pharmaceutical industry is gradually emerging. So the industry has been in a stable and healthy development stage. At the same time, our government has put great efforts in the medical system reform,so the pharmaceutical industry will face a better prospect for development. Assessing the value of listed pharmaceutical companies properly is conducive for the business owners and the investors to have a better understanding of the capital value and measure the performance of the company better. It also provides a basis for finance and investment, and it is a very effective evaluation tool of M&A and options trading.In this paper,15 listed companies of the pharmaceutical industry in China have been used for the study sample. In this paper, there is a combined use of literature review, theoretical discussion, case studies and empirical test methods. From this, the enterprise value assessment method model and its application have been studied systematically. In the first part of the paper, I referred this research background, the theoretical significance, research methods, overall framework and the related literatures of domestic and foreign enterprise value assessment methods. In the second and third part of the paper, I did the comparative research about the mainstream of current valuation methods. Considering the characteristics of the listed pharmaceutical company's industry and driving factors of value, I tried to choose the most suitable discounted cash flow valuation model in China. In the fourth and fifth part, I referred the concrete steps and methods of calculating enterprise value with the discounted cash flow valuation model from the empirical perspective. I also used the SPSS software to analyze the relation between intrinsic value of the sample companies and the market value in the 15 selected listed companies, to test the applicability of that method. In conclusion, there is a high degree of statistical correlation between intrinsic value of the sample companies and the market value. So that demonstrated the feasibility and applicability of the discounted cash flow valuation model in assessing the value of listed companies of China's pharmaceutical industry.