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ADVANC STOCK VALUATION
These are the two approaches that we used to evaluate the stock of Advanced Info Service: 1) Discount Dividend Model (DDM) 2) Relative Method
Discount Dividend Model
We assume that the dividends are trending upward at a stable growth rate. (b= 0.329, Rm= 10%)
P0= D1/ (k-g) k= Rrf + (Rm- Rrf)b
P0= 5.44/(5.303-5.281) k=3+(10-3)0.329= 5.303
P0= ฿247.27
D1= D0*(1+g) g = b*ROE
D1= 4.26(1+5.281)= 26.757 g= (reinvested earnings/book value)*84.46% g= 5.281%
Forecasting Growth
Right now, the stock’s intrinsic value is P0= ฿247.27 while its market price is set at only at ฿209. This can be concluded that the stock is undervalued thus encouraging investors to buy the stocks.
Pessimistic
Under pessimism, investor forecast that the company will have a slow growth in the future. Because of this, the growth rate will be reduce to g= 5.276%, and stock’s intrinsic value will only be P0= ฿201.48. Obviously, the market price of ฿209 will now be greater than P0= ฿201.48, causing the stock to be overvalued and encouraging investors to sell the securities.
Equilibrium
Under this circumstance, the growth rate will have to decline to g= 5.277%, falling from the original rate by 0.9%. At this rate, the stock’s intrinsic value will equal its stock’s market price. Thus, the market is said to be in equilibrium.
Relative Method 1) Price to Earning Ratio (P/E Ratio= Market value per share/EPS)
This is one of the most important indicators that investors can used to value company’s stock. It is the company’s current stock price divided by its earning per share. It values the company’s stock by showing the investors how many times they are willing to pay for every dollar of the company’s net profit.
P/E ratio= 20.65X
We found out that the company’s P/E ratio is slightly lower than the benchmark average in the telecommunications industry. This implied that ADVANC is doing better in term of investors’
These are the two approaches that we used to evaluate the stock of Advanced Info Service: 1) Discount Dividend Model (DDM) 2) Relative Method
Discount Dividend Model
We assume that the dividends are trending upward at a stable growth rate. (b= 0.329, Rm= 10%)
P0= D1/ (k-g) k= Rrf + (Rm- Rrf)b
P0= 5.44/(5.303-5.281) k=3+(10-3)0.329= 5.303
P0= ฿247.27
D1= D0*(1+g) g = b*ROE
D1= 4.26(1+5.281)= 26.757 g= (reinvested earnings/book value)*84.46% g= 5.281%
Forecasting Growth
Right now, the stock’s intrinsic value is P0= ฿247.27 while its market price is set at only at ฿209. This can be concluded that the stock is undervalued thus encouraging investors to buy the stocks.
Pessimistic
Under pessimism, investor forecast that the company will have a slow growth in the future. Because of this, the growth rate will be reduce to g= 5.276%, and stock’s intrinsic value will only be P0= ฿201.48. Obviously, the market price of ฿209 will now be greater than P0= ฿201.48, causing the stock to be overvalued and encouraging investors to sell the securities.
Equilibrium
Under this circumstance, the growth rate will have to decline to g= 5.277%, falling from the original rate by 0.9%. At this rate, the stock’s intrinsic value will equal its stock’s market price. Thus, the market is said to be in equilibrium.
Relative Method 1) Price to Earning Ratio (P/E Ratio= Market value per share/EPS)
This is one of the most important indicators that investors can used to value company’s stock. It is the company’s current stock price divided by its earning per share. It values the company’s stock by showing the investors how many times they are willing to pay for every dollar of the company’s net profit.
P/E ratio= 20.65X
We found out that the company’s P/E ratio is slightly lower than the benchmark average in the telecommunications industry. This implied that ADVANC is doing better in term of investors’