Valuation Analysis of the Banking Industry based on DCF, P/E and EBITDA Valuation

Abstract

Contemporarily, banks play a significant role in the global financial system, and by conducting valuation research on the Chinese banking sector. It is possible to determine whether the country's financial market is operating in a stable and efficient manner, whether Chinese banking stocks offer investment potential at this stage in the sector's life cycle, and other issues. This study examines the discounted future cash flow model, the P/E model, and the EBITDA valuation method on evaluation of the banking sector. The research findings lead to the conclusion that there is little chance of significant changes in the stock price of China's banking sector, that relevant stock risks for investors are minimal, and that stable dividends can be obtained annually. The industry is at a mature stage in its life cycle, therefore there are little opportunities for rapid, extensive growth. Overall, these results shed light on guiding further exploration of the valuation of China's banking industry and banking valuation methods.