Application Of DEVA Method For Optimizing Internet Enterprise Valuation

Since 1994,when China's Internet was integrated with the world,China's Internet industry began to develop rapidly.Internet enterprises sprang up like bamboo shoots after a spring rain.In 2018,there were 120 Internet listed enterprises.The restructuring and merger market of the Internet industry has also developed rapidly.In 2018,2948 cases of mergers and acquisitions were completed in China's M&A market.The Internet,IT and information industries accounted for 16.3% of the cases of mergers and acquisitions.The development of the Internet industry is bound to require a scientific and reasonable judgment of the value of Internet enterprises.However,the traditional corporate value model is very difficult to estimate the Internet enterprises,so it is very important to study new valuation methods.Based on the analysis of the development trend of the Internet industry,this paper studies the valuation of Internet companies.The traditional valuation model is usually based on the company's financial statements and industry development trend research.The key of valuation is usually to predict future profitability.Internet companies have high growth and future profitability is difficult to predict,which makes the traditional valuation method unsuitable for Internet companies.In order to solve this problem,the DEVA method came into being.The DEVA valuation method pays attention to the company's user value and the initial unit user cost,which has a good applicability for Internet companies.After analyzing the valuation method of DEVA,taking Kunlun Wanwei of Internet listed companies as an example,the enterprise value of Kunlun Wanwei at the end of 2017 is estimated by using the optimized DEVA method and PEG method respectively.The estimated results are compared with the market value of Kunlun Wanwei at the end of 2017,and the differences,advantages and disadvantages of the two methods are compared.It is found that the calculation process of PEG method is relatively simple,but the evaluation results are more sensitive to the profit growth rate.If the predicted profit growth rate changes by 10%,the estimated error of the results will change by 40%.However,the estimated error of the optimized DEVA model will fluctuate less and the valuation will be more accurate.Then,according to the advantages of the optimized DEVA valuation method,this paper proposes a stock investment strategy.The strategy threshold is based on the optimal DEVA estimation error.When the error is large,the stock price is considered to be overvalued or undervalued,and the operation of buying or selling is carried out.The results show that the superficial strategy can achieve higher returns in the bull market,and the loss in the short market is much smaller than that in the plate index,which has practical reference significance for investors.Finally,this paper analyses the shortcomings of the optimized DEVA method in its application.The DEVA method does not consider the profitability of Internet companies except the profitability of network,nor the ability of Internet companies to operate financial leverage.Therefore,it is suggested that the DEVA method be further improved in the future.Because of the characteristics of the Internet industry,it is of practical significance to study a new valuation model which is different from the traditional valuation methods.Future research directions should continue to focus on the industry characteristics,excavate the value of Internet companies and improve the Internet valuation system.