Investor Investment Strategy from Discounted Dividend Model Perspective

Abstract

Stocks, as a security in economic life and widely chosen by investors. The decision-making process of whether to allocate capital to stocks or not necessitates the employment of analytical methodologies, prominently including the assessment. This study employed, the 2-stage Dividend Discount Model, a classic model in stock price evaluations. Mitsubishi Heavy Industries, Ltd. (MHI) was selected as an example, on the basis of fundamental financial data and fundamental market information, the case study will determine the intrinsic value of MHI's shares. The analysis proffers that MHIs stock exhibits an undervaluation, warranting investors to consider a strategic position of acquisition and retention until equity valuations converge or above the intrinsic worth. In addition, the study simultaneously discusses the issues that need to be taken into account when using the model and analyses the problems with the model itself. The research also emphasizes the need to consider these findings alongside other factors, and additional valuation models for more accurate investment decision-making.