Valuation Of CRO Company Tigermed Consulting Ltd Based On ARMA-FCFF Model

In the context of the rapid development of China’s drug r&d industry,The CRO industry has gradually entered the investment horizon,and the industry is increasingly concerned about the valuation of companies in the CRO industry.This paper aims to sort out the theories and methods of enterprise value evaluation at home and abroad,and on the basis of analyzing the development status of China’s CRO industry,and the characteristics of Tigermed Consulting Ltd’s subdivision field,industry position,business finance,profit model and so on,screen out the joint valuation technology suitable for Tigermed Consulting Ltd,cash flow discounting method and multiplier method,and reasonably evaluate the enterprise value of Tigermed Consulting Ltd.First of all,this paper summarizes the CRO valuation research,ARMA forecast,grey correlation analysis and other related research and theoretical basis,and analyzes the advantages and disadvantages of cost method,market method,income method,option method and other common valuation methods and the scope of application.Secondly,this paper analyzes the development status of THE CRO industry in detail(including: Market size,competition,capital operation,subdivision,etc.),and a multi-dimensional comparative analysis of The business characteristics of Tigermed Consulting Ltd and representative CRO enterprises at home and abroad,combined with the risk of Tigermed Consulting Ltd,Based on the service characteristics and milestone profit model of CRO industry,this paper considers the feasibility of ARMA predictive modified FCFF model and cross-validated market method combined valuation.Therefore,this article respectively using ARMA model to predict the after-tax operating profit in the company’s cash flow with the cash part of the sum of the cost,to make the necessary operating assumptions to estimate the rest of the enterprise free cash flow,according to the capital asset pricing model to determine the cost of equity capital,and according to the capital structure and debt cost calculating weighted cost of capital,and then determine the enterprise value.The stability of the valuation results is judged by analyzing the difference between the multi-point valuation results and the market value of the enterprise,sensitivity analysis of the weighted cost of capital and growth rate,and reliability analysis of ARMA forecast compared with the weighted average and compound growth.In addition,preliminary determined 14 CRO candidate comparable companies,selects the du pont analysis system of profit ability,debt paying ability,operation ability and growth ability dimension and the r&d and technical personnel of multidimensional index evaluation system,through the dimensionless processing,calculate the grey correlation coefficient,and select the most similar three comparable companies,Cross-verify the valuation results.The valuation results of this paper are close to the market value of the enterprise.At the same time,this paper points out the limitations and shortcomings of this research and prospects the improvement direction such as dynamic adjustment and non-financial factors adjustment.