Stock Valuation in Pharmaceutical Sub-Sector Companies using the Discounted Cash Flow and Relative Valuation Methods in the 2013-2020 Period

Abstract

This research aims at calculating the fair value of shares of pharmaceutical companies listed on the Indonesia Stock Exchange (IDX). The data used in this research is historical data from the 2013-2020 financial statements, which are used as the basis for projections in 2021-2025. The method used in this research is Discounted Cash Flow (DCF) method with Free Cash Flow to the Firm (FCFF) approach and Relative Valuation method with Price to Earning Ratio (PER) and Price to Book Value (PBV) approaches in three scenarios. The three scenarios used are the optimistic scenario (condition above industry growth), the moderate scenario (the most likely condition for the company), and the pessimistic scenario (the average condition of the industry). The results of the research showed that by using the DCF-FCFF method, KAEF and PYFA stocks experienced overvalued conditions in all scenarios. Meanwhile, KLBF and DVLA stocks were undervalued in all scenarios. Then, from the calculation of the Relative Valuation method, each company was still within the industry range in all scenarios. Overall, KAEF stocks were overvalued by 57.817%, KLBF stocks were undervalued by 7.879%, DVLA stocks were undervalued by 370.865%, and PYFA stocks were overvalued by 16.662% both in DCF method and in Relative Valuation method.