Free Cash Flow To Equity Research Articles

The Roadmap of a Cash Dupont Analysis and Its Impact on Stock Valuation Strategy

It is a common belief that capital intensive corporations are associated with relatively low profit margins. They operate in environments where it may be a struggle to keep returns in excess of their capital costs. This further implies a possible decline in stock value because of these lower margins. This paper extends the financial literature on the effects of capital intensity on firm performance through the introduction of the Cash DuPont Model in conjunction with a Monte Carlo Simulation. The model’s use of the free cash flow to equity (FCFE), cash conversion factor (CCF), and resulting Cash ROE ultimately leads to the determination of the fair price to book value multiple. All of these data metrics are blended into a process of stock price valuation that explains both the possibility and probability of the mispricing of a stock. The results reveal that a capital-intensive firm can show undervalued tendencies despite low profit margins.

Stock Valuation of PT. Bank ABC Tbk.

PT Bank ABC Tbk aspires to be one of the top 10 global sharia banks in 2025 in terms of market capitalization. As of December 2023, PT. Bank ABC Tbk ranks 13 with 5,18 billion USD in market capitalization. This research aims to examine PT. Bank ABC Tbk stock by using Discounted Cash Flow (DCF) through Free Cash Flow to Equity (FCFE), and Relative Valuation method through the Price to Book Value (PBV), and to determine whether the stock is undervalued or overvalued. According to Free Cash Flow to Equity (FCFE) valuation result, the intrinsic value per share of PT. Bank ABC Tbk is Rp 37.497 per share, while its share price as of 31 December 2023, is Rp 1.740, indicating that the stock of PT. Bank ABC Tbk is undervalued by the market. This means that the market has not completely recognized the PT. Bank ABC Tbk ‘s ability to generate future cash flows. PT. Bank ABC Tbk’s undervalued stock offers the possibility of returns for the potential investor as the share price rises over time to reflect the intrinsic value per share. The company’s Price to Book Value (PBV) is 2.07, while the PBV of the average of the company’s peers is 2.72. This means PT Bank ABC Tbk is undervalued ie. the share is underpriced compared to the average of its peers. Based on the result, this research recommends to buy the stock of PT. Bank ABC Tbk because it is undervalued based on FCFE and based on PBV.

Factors Influencing the Intrinsic Value of SSI Stocks

Based on current research on stock analysis and valuation in Vietnam, there are various gaps in research groups studying the analysis and selection of valuation methods that are most suitable for practical application in the domestic stock market, particularly with regard to SSI stocks. Using the Free Cash Flow to Equity (FCFE) and Dividend Discount Method (DDM) approaches, the author identifies the resources of SSI Company for the years 2024 to 2026. However, the intrinsic value of SSI stocks is currently not accurately priced due to both objective and subjective factors outlined in the empirical section. Therefore, the author proposes specific solutions for the company and the state.

Valuing & Pricing Financial Firm: Case of P.T. Bank Muamalat Indonesia,Tbk. Prior IPO Plan in 2023

This research is focused on determining the intrinsic fair value of the P.T. Bank Muamalat Tbk (BMI/Bank) for pre-IPO initial offering price. The research begins with a banking industries analysis where the author will look for industry average ratios data. This analysis helps the author to summarize the company's internal & external position. Author differentiates the banking industries into two industries conventional bank and Islamic Sharia bank. Author will calculate the average ratios from the two industries, which is Commercial Conventional Bank (BUK) and Islamic commercial Bank & Islamic Business Unit (BUS & UUS), and will use them as multiples ratio. To determine the fair value of this research author uses two methods approach the relative and absolute valuation methods. On the Absolute valuation method, the author uses the Discounted Cash Flow (DCF) method with Free Cash Flow to Equity (FCFE) approach specifically for banks by looking at the regulatory capital with a projection of 5 years. While on the relative valuation method, the author uses three perspective approaches: earnings, book value, and revenue perspective. Multiples ratios representing the perspective are Price Earnings Ratio (PER), Price to Book Value (PBV), Price to Sales (P/S), and Price to Operating Profit (P/OPPS) approaches. To determine the Bank fair value author, differentiate the calculation involving negative earnings and see the effect of it. The data used in this research comes from historical data during the 2017 to 2022 period, also including the last quarter's performance in March 2023. The result of the relative valuation method of the three perspectives gives the result of an intrinsic fair price with a range of IDR 103.94 – IDR 168.18. Meanwhile as for absolute method, author use discounted cash flow method with free cash flow to equity for a financial firm, and it gives a result of intrinsic share price with a range IDR 152.84 – IDR 197.27. Thus, the average intrinsic fair price using the two valuation methods is IDR 149.54 – IDR 182.97. In the end, the result of this research is to find the real fair price based on academic study and could be used as a reference in the initial stock pricing pre-IPO plan of the Bank in 2023.

Valuation of Software Agency for Pre IPO Using DCF and Relative Valuation Method (Study Case: PT XYZ)

An Initial Public Offering (IPO) is a pivotal moment in a company’s life cycle. It’s a process where a private company offers its shares to the public in the capital market to raise funds. The move from private to public affecting the company to prepare for many changes, including increased supervision and the responsibility of delivering value to shareholders. However, before stepping on this significant IPO step, the company needs a clear understanding of various factors, which includes macroeconomic conditions, the dynamics of the market it operates in, and the company’s internal conditions. The company, PT XYZ, specializes in creating software solutions, a sector that is currently needed by a lot of company due to digitalization era. Fair share price for PT XYZ must be calculated when it goes public. In addition to understanding the macroeconomic condition, the Porter’s Five Forces framework is described to assess the competitive aspect in the market and potential opportunities. After analysing the external factors, the next step is doing in-depth internal analysis. This involved a SWOT analysis by identifying PT XYZ’s Strengths, Weaknesses, Opportunities, and Threats, and an evaluation of the company’s financial health. The business solution proceeded to the valuation stage, using the Discounted Cash Flow (DCF) method with Free Cash Flow to Equity (FCFE). This process involved making growth projections for the next decade. It anticipates that the company’s growth rate would eventually align with Indonesia’s Gross Domestic Product (GDP), serving as the long-term growth rate. To ensure a holistic evaluation, there must be a complementary valuation method, Relative Valuation. Three similar companies in the software sector were picked and their EV/EBITDA was used as a multiplier ratio. The two separate valuation methodologies led to two distinct results. Thus the average of these two methods can be proposed. Overvalued or undervalued share pricing can significantly affect investor decisions and the amount of funds raised from the IPO.

Analisis Fundamental untuk Memperoleh Nilai Wajar Saham SMDR dengan Metode Free Cash Flow to Equity dan Price Earning Ratio

Investors or parties who invest in shares, so far have faced obstacles in assessing the fair price of the stock to be purchased. The main cause lies in the limited knowledge or insight in conducting basic or fundamental analysis of the stocks to be purchased. The consequences that are often experienced are investing overvalued, price distortions, rushing to sell back shares so that the investment does not get optimal results. The objective of this paper contributes to analyze the fairness of SMDR's stock (PT. Samudera Indonesia, Tbk.) using the Free Cash Flow To Equity (FCFE) method and the Price Earning Ratio (PER) method, assuming constant economic growth and calculating intrinsic value using a comparison of the two methods. This research is a descriptive study using a quantitative approach. The object of this research is the stock of PT. Samudera Indonesia, Tbk (SMDR). In analyzing, the author will make a financial model with projections for the next 10 years and compare it with the current share price, to find out whether the company's shares (SMDR) are considered fairvalued, undervalued or overvalued. The use of FCFE will be more prominent as of this writing, using a discounted cash flow valuation framework. This research in the form of a fundamental analysis of SMDR shares will be conducted based on published audited financial reports for the years 2016 – 2021. The theoretical benefit of this research is to assist investors in assessing a company's shares, using the FCFE method, in determining investment decisions (buy/hold/sell).

Equity Valuation using Free Cash Flow to Equity on IDX30 Index for 2022 to 2026 Period Projection

The purpose of this paper is to determine the intrinsic values of several companies listed in the Indonesian stock market.This study employs the two-stage Free Cash Flow to Equity (FCFE) valuation model and makes a five-year projection based on historical data from 2016 to 2021.Six listed companies from theIDX30 index, thirty are selected for this study based on certain criteria. Data used include annual reports, risk-free rates, and historical prices from individual company websites, Yahoo Finance, and the Indonesia stock exchange market authority (IDX) website. Results show that two consumer goods companies, INDF and UNVR,are undervalued, while four companies from various sectors, ASII, CPIN, MIKA, PTBA, are overvalued. This finding suggests that investors can apply a straightforward valuation model to determine the true value of companies and make investment decisions based on the results. However, the FCFE valuation model is based on a set of assumptions that may differ from one investor to another, leading to different valuation results.

Analisis Valuasi Saham menggunakan Free Cash Flow to Equity (FCFE), Price Earning Ratio (PER) dan Kinerja Keuangan dari sudut pandang Economic Value Added (EVA)

ABSTRACT
 In investing activities, investors have various options to choose financial instruments in the capital market such as stocks and bonds. Stocks are one of the most popular assets in the capital market. However, that investing involves high risks and challenges for investors. To reduce this risk, stock valuation is used before choosing the decision to be taken on the desired stock.
 Stock valuation is one important thing in investing. The aim is to help investors to minimize the risk of investment through intrinsic value in making investment decisions. The evaluation model for calculating intrinsic value is fundamental analysis with Free Cash Flow to Equity (FCFE) and Price Earning Ratio (PER). In addition, an assessment of financial performance using the Economic Value Added (EVA) point of view is added to determine the company's ability to empower its capital as one of the parameters in investment decisions. By using regression analysis, it is found that EVA is not able to be a predictor of FCFE, while EVA can be a predictor of PER.
 The results of the calculations, there are not companies that have the results according to the recommendations. Investors or stakeholders can choose the company according to the point of view they want or need, they tend to value stocks by looking at the company's available cash flows or more interested in assessing the company's income and stock prices. According to the calculation results, the results of undervalued stocks in the stock valuation analysis (FCFE/PER) and the lowest negative EVA results from the undervalued stocks can be an option.
 Keywords: Stock Valuation, Financial Performance, FCFE, PER, EVA
 
 
 
 
 

Valuasi Saham dan Pengambilan Keputusan Investasi: Perbandingan Metode Absolute dan Metode Relative

One of the benefits of stock valuation is that it helps investors in making investment decisions. This study aims to compare the intrinsic value of shares using absolute and relative methods. The absolute method used in this study consists of the Dividend Discounted Model (DDM), Discounted Cash Flow (DCF), and Free Cash Flow to Equity (FCFE) while, the relative method consists of Price Earning Ratio (PER), Price to Book Value ( PBV), and Price to Sales (P/S). This study uses four samples of cement sub-sector companies listed on the Indonesia Stock Exchange in 2015-2019. The results based on the measurement of the accuracy of the stock valuation method with Root Mean Squared Error (RMSE) indicate that the DDM approach is the most accurate compared to others. In addition, the results of this study recommend investors sell shares coded INTP because the stock price is included in the overvalued and buy shares coded SMBR, SMGR, and WTON because the stock price is classified as undervalued. However, stock valuation does not fully determine investment success, so investors still have to consider the assumptions of each stock valuation model.

Stock Valuation using Discounted Cash Flow Method with Free Cash Flow to Equity and Relative Valuation Approaches on State-Owned Banks Listed on IDX for 2021 to 2025 Period Projection

This study aims to project the intrinsic value of state-owned banks listed on IDX for the 2021 to 2025 projection. This study uses the Discounted Cash Flow (DCF) method with the Free Cash Flow to Equity (FCFE) approach specifically for banks by looking at the regulatory capital. Meanwhile, it is also used the Relative Valuation method with the Price to Book Value (PBV) and Price Earnings Ratio (PER) approaches. This study uses three scenarios will be used, which consist of a pessimistic scenario (the average condition of the industry), a moderate scenario (the same condition as the company's growth), and an optimistic scenario (a condition above industry growth), which aims to project the stock value over the next five years. The data used in this study comes from historical data during the 2016 to 2020 period. Based on the results, the stock prices of state-owned banks using the FCFE method shows undervalued results for all scenarios. Meanwhile, using the relative valuation method, PBV in the optimistic scenario only shows BBNI undervalued conditions. In addition, in moderate and pessimistic scenarios, only BBRI shows overvalued conditions. Furthermore, PER shows undervalued results for all scenarios.

Valuation of Equity using Discounted Cash flow Method

The growth of any economy depends on the strong financial system. Capital market plays a significant role in channelizing the savings into an investment activity by providing the platform to the investors as well as the firms to raise money. There are various instruments available for investment activities globally. Every investor has an objective to diversify portfolio globally to minimize risk among foreign markets and companies. Investor has to acquire the necessary skills to analyze the stocks to make better investment decisions in order to create wealth maximization. Valuation of equity is pre requisite for intelligent decision making in choosing the right scrip for investment in deciding the true value or intrinsic value of a share. There are few methodologies to evaluate the valuation of stocks such as discounted cash flow method, dividend discounted model. In this backdrop, this paper made an attempt to evaluate the Skyworks Solutions, Inc. stock with free cash flow to equity (FCFE) method of valuation during the 2016 to 2019 and to determine the intrinsic value of the stock and results found to be undervalued.

The Intrinsic Value of an Enterprise Determined by Means of the FCFE Tool

This paper deals with the determination of the intrinsic value of the company Seznam.cz, a.s. using discounted cash flow. Specifically, it is concerned with determining the value of the business from the perspective of the company’s shareholders. The Free Cash Flow to Equity (FCFE) method is chosen for analysis and determination of the value. According to this method, the specific FCFE values are discovered. However, the enterprise value must also be analyzed on the basis of other key indicators, such as financial leverage, the Capital Asset Pricing Model (CAPM) method, or the net present and future value of the FCFE. This is especially important so that the results can be put into mutual relations and a sufficient representative value of the FCFE results can be achieved. Input values stem from the company’s annual reports. From the results of the mentioned methods and indicators, it was found that the value of the FCFE is quite high, which means that the capital used is used appropriately. Based on the result of the continuing value of the FCFE, it can be said that the company’s intrinsic value is at a very good level.

Business Activity and Assessment of the National Banking System in Terms of the VBM Concept

The reform of the Russian banking system is being stalled due to the imperfection of existing methods of assessing both the whole market value of business and its banking segment. This circumstance restrains the business activity of Western investors in the Russian financial market, provokes momentary speculative sentiments in it and strengthens crisis factors. The purpose of the research was to reveal the relevance and the possibility of applying the VBM concept, recognized and accepted in the majority of developed economies, to the banking business. The analysis of the works of foreign and domestic authors shows the need for further Russian theoretical developments. It is proved that the banking business market in Russia is undervalued. Based on the aggregate analytical data, the free cash flow to equity (FCFE) of the banking system is calculated. Based on the net profit of the banking system, its market value and the range of values in which it can be found are estimated. It is concluded that the growth of the Russian banking system measured in terms of capital and assets does not lead, as a minimum, to the growth of the market value, and, as a maximum, is accompanied by a decline in the market value. The prospects of the practical use of the VBM concept both for individual bank management and for the industry in the whole are substantiated.

Reconciling FCFF and FCFE in Nominal and Real Models

The objective of this paper is to reconcile Free Cash Flow to Firm (FCFF) and Free Cash Flow to Equity (FCFE) approaches, in nominal and real term models, considering potential and actual distribution. In order to do so, some mathematical derivations are made to help reconciliation, especially in real term models. In addition to that, application of both approaches, in nominal and real models, are developed through full examples. Two discussions are addressed: (1) valuation approaches inconsistency debate, to which there are two possible corrections in order to assure that inputs (in capital structure) in both approaches reflect the same assumptions and (2) potential versus actual distribution debate, which considers that the firm does not distribute all cash available for distribution. To reconcile nominal and real term models, there is necessary caution to assure that the tax shield over the inflation embedded in the nominal cost of debt is considered in the real model. When considering actual distribution, there are additional necessary adjustments to calculate real term earnings consistent with nominal earnings, in order to reconcile both models.

VALUATION PADA INITIAL PUBLIC OFFERING (IPO) BANK BRI SYARIAH

Adding the number of ownership by issuing new shares and selling them to the capital market, is one alternative method used with the aim of increasing the Company's finances, funds and capital. The issuance of the company's initial shares and selling them to the capital market is called the Initial Public Offering. BRI Syariah Bank adds capital by conducting an IPO, so that it is necessary to analyze Stock Prices on the Initial Public Offering (IPO) of BRI Syariah Bank to obtain stock fair value that does not harm the company if the stock price is too low or detrimental to investors due to stock prices too high (over valued). The research problem formulation is: How is the valuation of the initial stock price of BRI Syariah Bank using the Relative Valuation Model method, How is the valuation of the initial stock price of BRI Syariah Bank with the Free Cash Flow to Equity (FCFE) method, and Is the initial stock Under Valued or Over Valued. The researcher analyzed the data obtained using quantitative descriptive methods. The value of Bank BRI Syariah shares calculated using the Relative valuation method and FCFE are in an overvalued position. The initial stock decision taken by the company is correct, that is, if the valuation is done using the Relative Valuation and FCFE methods, the company is already due because the stock price in the market is overvalued.

PENILAIAN SAHAM PT PEMBANGUNAN PERUMAHAN PROPERTI DALAM RANGKA INITIAL PUBLIC OFFERING

This research aimed to estimate fair value per share of PT Pembangunan Perumahan Property Tbk. as a comparison value to the offered price, set at the time of Initial Public Offering (IPO). This research also aimed to determine whether the price offered at the time of IPO was undervalued or overvalued. Information used in this research was in the form of secondary data of PT Pembangunan Perumahan Property, the financial report of comparable companies, and stock prices of comparable companies. The analyzing tools used to determine the fair value per share were discounted cash flow method and the relative valuation method. The discounted cash flow method was performed through the projection of the financial statements i.e. the balance sheet and income statement, the projection of Free Cash Flow to Equity (FCFE), determination of the discount rate, determination of terminal value, and determining the estimated value of the equity. The relative valuation method was established by searching, choosing and determining the appropriate multiple of comparable companies in similar business. Multiples used were: Price Earnings Ratio (PER), Price to Book Value (PBV), and Price to Sales Ratio (P/S).

KEWAJARAN NILAI PASAR SAHAM PERUSAHAAN PASCA RIGHT ISSUE

<p><em><span>This study aims to estimate the fair value per share of PT BW Plantation Tbk after the company offered right issue. This study is also intended to find out the fair market value per share of PT BW Plantation Tbk post-rights issue. The information used in this study was obtained from secondary data from the financial statements of PT BW Plantation Tbk., which were audited by public accountants and other information available in the financial statements. BW Plantation Tbk., The company's financial statements comparison, and the company's stock price data comparison. The methods of analysis used in determining the fair value per share is the Discounted Cash Flow and Relative Valuation. Discounted Cash Flow analysis was done by: projections of financial statements i.e. balance sheet and income statement, the projected Free Cash Flow to Equity (FCFE), the determination of the discount rate, the determination of Terminal Value, and the estimated fair value of equity. Analysis of Relative Valuation begins with finding the comparison companies in the same business line, select and assign the appropriate multiple of the comparison companies. Multiple used are: Price Earnings Ratio (PER), Price to Book Value (PBV), and Price to Sales Ratio (P / S).</span></em></p><p><em><span>Keywords: valuation of shares, rights issue, discounted cash flow, relative valuation</span></em></p>

The Impact of Free Cash Flow on Market Value of Firm

This paper constitutes an attempt to investigate the relationship between Free Cash Flow to Equity (FCFE) and the firm's market value of the pharmaceutical sector of Jordan by using a valuation technique, wherein the rift between theory and practice still need to be accommodated taking in consideration the relationship of FCFE, Net Income, Net Capital Expenditure, Working Capital and Debt Position. This paper uses panel data covering the period 2004-2010. The determination of a company's market value is a difficult decision, taking into account several antagonistic factors, such as risk of debt and capital expenditure, in times when the economic environment in which the company operates is unstable, therefore the choice among the ideal equation of FCF to Equity can affect the market value of the firm as much as profit rate can. The results show that the market values of a firm are assessed by the Free Cash Flow to Equity. Our result is in accordance with the hypothesis that FCF to Equity has significant positive effect on the stock market. Our findings add to the understanding of the determinants of the market value of firms.

DCF DAN RELATIVE VALUATION UNTUK MENGESTIMASI SAHAM PT. ATLAS RESOURCES DALAM IPO

This research aims to estimate fair value per share of PT. Atlas Resources, Tbk. as a comparison value to the offered price, set at the time of Initial Public Offering (IPO). This research also aim to determine whether the price offered abovementioned were undervalued or overvalued. Information used in this research is in the form of secondary data of PT. Atlas Resources, Tbk.fi nancial statements for the period of fourth years from 2007 to 2011 which was audited by public accountants collectively with other information contained in yhe its prospectus, fi nancial report of comparable companies, and stock prices of comparable companies. The analyzing tools used to determine the fair value per share are discounted cash fl ow method and relative valuation method. The discounted cash fl ow method were perform via: projection of the financial statements i.e. the balance sheet and income statement, projection of Free Cash Flow to Equity (FCFE), determination of the discount rate, determination of terminal value, and determining the estimated value of the equity. The relative valuation method is established by searching, choosing and determining the appropriate multiple of comparable companies in similar bussines. Multiples used are: Price Earnings Ratio (PER), Price to Book Value (PBV), and Price to Sales Ratio (P/S).

TOMATO PROCESSING FIRMS’ MANAGEMENT: A COMPARATIVE APPLICATION OF ECONOMIC AND FINANCIAL ANALYSES

In Italy, the territory that includes the Emilia-Ro magna region, the southern areas of Lombardia and some of Piemonte’s territory is a center of nationa l importance for tomato production and transformation. The processing firms operating in t his area are characterized by significant investmen ts in fixed assets and working capital. The article an alyzes the annual account data of a sample of firms , showing that economic margins traditionally applied to assess the sustainability of the business cycle differ significantly from financial margins; also, the Interest Coverage Ratios (ICRs) differ if calculated by applying an economic or a financial a pproach. Moreover, the annual account data highlight difficult credit access, expressed by app lying a multiple regression model to analyze Free Cash Flow to Equity (FCFE) generation. The article suggests a useful metric to measure more correctly the sustainability of a firm’s management that coul d be applied to others in the agri-food sector, particularly if characterized by a capital-intensiv e processing cycle.