Research Of Evaluating Corporate On The Point Of Periodicity

As the economy develops, China’s financial industry thrives. More investors participate in the security market. They should effectively identify the value of different companies to avoid financial risks and crisis. Assessment of company’s value has an important significance on mergers and acquisitions, corporate management and investors’decision-making.The inherent volatility of cyclical industry makes it more difficult to assess the company’s value. Besides, cyclical industry stocks occupy a large market share in the China. How to effectively carry out a cyclical industry valuation is essential to the stock market. Cyclical industries mainly include bulk raw materials, the real estate and other important industries, which are closely relate to macro economy. Thus, the intrinsic value of the company cyclical company is conducive to the healthy operation of the economy and efficient allocation of resources.This paper is based on the point of cyclical industry. Through organizing corporation Valuation system and cyclical industry theory, this paper analyzes the basic methods. By carding empirical studies, we conclude that:when the economy is going up, cyclical companies are easily overvalued. When the economy is going down, cyclical companies are easily undervalued.Combined the actual situation of China’s listed companies with characteristics of cyclical companies; we compare two commonly used valuation methods and make improvements.Making a compare between the real price and the predicted price, we can determine whether the modified models are upgraded.In order to verify the improved valuation model is more suitable for cyclical companies’valuation, this paper selects the real estate as research subject. Using the Vanke as a specific case study, this article can be divided into four parts:The first part makes the basic summary. Stock valuation’origin, theories’ development, evaluation models’improvement and the characters of cyclical companies are key point to evaluation.The second part focuses on two valuation methods:absolute evaluation and relative evaluation. Dividend discount model is suitable for companies that have relatively stable dividend policy, discounted free cash flow model are more widely applied. PE valuation method can reflect the comprehensive condition of a company. But PE ratio is not only affected by the company itself but also by the overall economy. Price-to-book ratio is suitable for the company with substantial assets and cyclical companies. Price-to-sales ratio is stable, reliable and not easily manipulated. However, it only focuses on sales, while ignoring costs.The third part company has explores on the evaluation methods so that they are fit for valuation. With cyclical companies’ characteristics, data are smoothed to correcting the inherent volatility and optimize models.The fourth part chooses the real estate industry as a case study. Vanke’s forecast prices that are calculated by optimized models are lower than the share price on December 31,2014. It represents that Vanke is overvalued. The results match predictions and empirical results, demonstrating the improved valuation model is applicable for cyclical companiesThe fifth part is conclusion and provides policy recommendations for future research.