Valuing H Company's Stock Based On The Model Of FCFF

In more than 20 years's development,China's capital market,which has implemented the reform of equity division,opened the GEM,operated margin trading business and the Shanghai and Shenzhen 300 index futures,gradually get improve and mature.May 2015,the volume of Shanghai and Shenzhen stock trading has exceeded 1 trillion RMB,and the total market capitalization is more than 60 trillion RMB.China's capital is becoming the world's the biggest and most active capital markets.China's capital market develops rapidly and provides investors with a large number of investment opportunities.In this paper,it analyzes and values the stock of H company which belong to the security industry,using free cash flow discount method and two stage growth model.In order to reasonably evaluate the stock value of H company,this paper makes a deep analysis of H company from two aspects.On the one hand,it makes a detailed analysis of H company on its business environment,including economic environment,technology environment,policy environment and security industry environment.The study reveal that the security industry is a industry with good development prospects and valuable for investment.On the other hand,it deeply studies H company's operating capabilities,including its industry status,competitive advantage,operating capacity,etc..The study reveals that H company's finance is healthy,competitive ability is good,and with good growth.In the process of evaluating the intrinsic value of H company,this paper divides the management period into two stages:explicit forecast period and sustainable growth period.The free cash flow of each year in the forecast period is calculated in detail,and the free cash flow in the sustainable growth period is calculated by the key value factor formula.Based on the future strategic strategy,it uses the trend method to predict the main business income of H company in the next 6 years.On the basis of historical performance analysis,and considering the situation of the contract industry companies,it predicts the future main business costs,expenses,depreciation,capital expenditures and other subjects,so as to calculate the future free cash flow of H company.When calculating the discount rate,this paper uses the weighted average capital cost(WACC)and the capital asset pricing model(CAMP).In order to make up for the disadvantages of free cash flow discount method without considering the market factors,this paper uses the price earnings ratio method to supplement.After analysis and evaluation,the intrinsic value of H company's stock is range from 44.99 yuan to 57.55 yuan.The analysis of this paper will help to better understand the value of H company,and provides useful reference for investors.