Du Pont Analysis And Value Evaluation

As a financial analysis tool,asset return is decomposed into three components:asset turnover,profit margins and equity multiplier to judge the value of the company from different point of view based on Du Pont Analysis.However,the differences between industries,such as marketing competition,capital structure,government regulation degree,will significantly affect the accounting information content and its incremental ability.This paper includes 2345 non-financial companies,which are from Shenzhen and Shanghai stock exchang market,from 1998 to 2014.Based on the government regulation degree,A-share listed companies this paper chooses are divided into regulated and non-regulated industry by the 2012 industry classification.This paper explores the information content of comprehensive and component indexes of Du Pont analysis under different conditions,and discusses the applicability of traditional and improved Du Pont analysis in different industry groups.The results show that:(1)As for traditional and improved Du Pont analysis,the comprehensive indexes can improve more information increment ability than the component indexes in predicting future profitability and fitting stocks returns.Whileas,compared with the non-regulated industry,the component indexes and comprehensive index of the regulated industry have a lower statistical correlation in predicting future profitability and fitting stocks returns.(2)In the regulated industry,the profit margin indexes have a higher level of information than the asset turnover indexes in predicting future profitability and fitting stocks returns,but its explanatory ability is limited.(3)Compared with the non-regulated industry,future stocks returns have a lower statistical correlation with the component indexes and the absolute amount of comprehensive indexes in the regulated industry,but a statistical correlation with the change of comprehensive indexes of Du Pont analysis.(4)Both in the non-regulated industry and in the regulated industry,the indexes of improved and traditional Du Pont analysis have information increment ability in predicting future profitability and fitting stocks returns,but the indexes of improved Du Pont analysis are not obviously superior to the indexes of the traditional Du Pont analysis.This paper makes a greater contribution to related empirical studies on Du Pont analysis and value evaluation.It has some significance for investors and managers to judge the value of the corporate reasonably and accurately,and for accounting regulator to design system.