Comparison of The Dividend Discount Model and The Discounted Cash Flow Model Valuation of Stock Kweichow Moutai

Abstract

Stock valuation is an essential element of investment analysis, aiding investors in gauging a company's true worth. This essay conducts a literature review and a thorough demonstration of the calculation process, focusing on the Discounted Cash Flow (DCF) Model and the Dividend Discount Model (DDM), as key tools in stock valuation. The research examines the valuation of Kweichow Moutai Co., Ltd., a prominent Chinese company in the beverage industry. The results yielded significant disparities from the market price, with the DCF model indicating potential overvaluation by approximately -33.39%, while the DDM model pointed to an even greater overvaluation of about -77.94%. These findings underscore the complexity of stock valuation and the need for a comprehensive approach. Investors should not solely rely on market sentiment but should combine these models with extensive research and a diversified portfolio strategy.