An Empirical Analysis on the Feasibility of Financial Valuation of Technology Companies: A Fundamental Analysis Approach Based on Value Investing

Abstract

This study addresses the significant challenge of accurately valuing internet companies in the contemporary business landscape, recognizing existing research gaps due to the limited applicability of conventional valuation methods such as Net Present Value (NPV) and Price to Earnings (PE) ratios in this emergent industry. This paper conducted a fundamental analysis based on the principles of value investing, utilizing 2022 financial data from thirteen internet companies listed in Forbes Global Technology companies. Key financial aspects, including liquidity, debt-servicing capacity, profitability, and shareholder returns, were meticulously analyzed. The findings reveal that internet companies face cash flow pressures impacting their liquidity. Despite a moderate long-term debt ratio, companies exhibit substantial reliance on debt financing, encountering difficulties in interest payments. While these firms demonstrate a capacity for profitability, they concurrently face intense competition and cost pressures. The market sentiment remains highly optimistic regarding the future prospects of internet companies, reflecting elevated valuations. In light of favorable market conditions, it is imperative for internet companies to strategically enhance competitive advantages, bolster core product competitiveness, and amplify profitability through innovative operational and marketing strategies, thereby augmenting their industry influence and societal impact.