"Active Return to Investors" Series - Fundamentals of Listed Companies
Risk revealing educational articles
For the grasp of the investment value of listed companies, the specific implementation of the company's own business conditions and development prospects. Investors need to understand the company's position in the industry, market share, financial status, future growth and other aspects to make their own investment decisions.
First, the company's fundamental analysis
1. Company industry status analysis
The comprehensive ranking in the industry and the market share of the products determine the company's competitive position in the industry. Advantageous enterprises in the industry have a strong influence on product prices due to their leading position, and thus have a profitability higher than the industry average.
2. Company economic location analysis
The natural and basic conditions within the economic location include mining resources, water resources, energy, transportation, etc. If the industry in which the listed company is engaged is in line with the local natural and basic conditions, it is more conducive to its development. The industrial policy of the government within the district is also crucial for the development of listed companies. According to the economic development strategy plan, the local government will give preferential financial, credit and taxation measures to the industries that are prioritized for development and support in the district. Further development of listed companies in related industries.
3. Company product analysis
The products or services provided by the company are the source of its profit. Product competitiveness, market share, brand strategy, etc., often have a greater impact on their profitability. In general, the company's products have a comparative advantage in terms of cost, technology and quality, and are more likely to obtain excess profits above the industry's average profit level; the higher the market share of the products, the stronger the company's strength and the higher its profitability. Stable; company products with brand advantages often get the corresponding brand premium, and the profitability is higher than those products whose brand advantage is not outstanding. Analysis and forecasting the market prospects and profitability trends of the company's main products can also help investors better predict the company's future growth and profitability.
4. Company business strategy and management
The company's business strategy is a long-term plan for the company's business scope, growth direction, speed and competitive countermeasures, directly related to the company's future development and growth. The quality and ability of the management also play a key role in the company's development, and excellent managers can lead the company to continue to develop.
Excellent listed companies should have long-term sustainable competitive advantages and good development prospects, have strong sustained profitability, be able to better withstand cyclical fluctuations, and have corporate governance that rewards investors with sustained and stable cash dividends. mechanism. Paying attention to cash dividends, on the one hand, it can rationally allocate funds of listed companies and curb the blind expansion of investment; on the other hand, it will help attract long-term funds to enter the market, stabilize the company's stock price, and fully guarantee the stability of investor returns.
Second, the company's financial analysis
The financial statements of a listed company are a microcosm of its production and operation activities for a period of time. It is an important basis for investors to understand the company's operating conditions and forecast future development trends. The financial statements published by listed companies mainly include balance sheets, income statements and cash flow statements. The balance sheet reflects the company's financial position at a specific point in time (usually at the end of the season or at the end of the year), reflecting the situation between the company's assets, liabilities and shareholders' equity at that point in time; the income statement reflects the company The production and operation results in a certain period reflect the various components of the company's profits; the cash flow statement reflects the cash inflow and outflow of the company within a certain period of time, indicating the company's ability to obtain cash and cash equivalents. We usually use financial ratio analysis, such as asset-liability ratio, return on net assets, etc., to reveal the current operating status of the company using the relationships between the projects listed in the company's financial statements.
Through financial analysis, it can not only help investors better understand the operating status of listed companies, but also help to identify problems in the operation of listed companies or identify false accounting information. In the case study of Lantian shares, Professor Liu Weiwei used financial analysis methods to expose the truth of Lantian's provision of false accounting statements: the liquidity ratio and quick ratio of Lantian shares in 2000 were 0.77 and 0.35 respectively, indicating that Lantian shares can be converted into cash in the short term. The current assets are insufficient to repay the current liabilities, and only 35% of the current liabilities are repaid after deducting the inventories; the current ratio and the quick ratio are about 5 times and 11 times lower than the peers' average, respectively, and the short-term solvency is the lowest. From 1997 to 2000, the fixed asset turnover rate and current ratio of Lantian shares decreased year by year. By 2000, both of them were less than 1, and their ability to repay short-term debts became weaker. Combined with the analysis of the company's sales revenue, cash flow, and asset structure (not to be repeated here), Professor Liu Weiwei concluded that the solvency of Lantian shares has deteriorated. After deducting various costs and expenses, the company has no net source of income. ; Can not create enough cash flow to maintain normal business activities and guarantee the repayment of the principal and interest of bank loans on time.
In addition, the cash dividend policy is also one of the important yardsticks to measure whether the company has investment value. Indicators such as dividend payout ratio and dividend yield can be used to measure the return level of listed company investors. Dividend payout ratio refers to the ratio of cash dividend to net profit, and dividend yield is the ratio between dividend and stock price. If a listed company has a high proportion, consistently and consistently cash dividends, and the annual cash dividend rate for many years exceeds the one-year bank deposit rate, then this stock can basically be regarded as a yield stock with long-term investment value. However, if a profitable company does not pay dividends for a long time, investors should be careful. A small number of listed companies may defraud investors by exaggerating or fictitious operating income and net profit, but there is no way to falsify cash dividends paid to investors. Fraud cases such as “Silver Guangxia”, “Lantian Shares” and “Beisheng Pharmaceutical” were all discovered through the huge contrast between operating performance and cash dividends. Therefore, paying attention to the cash dividend policy of listed companies also helps investors to judge the authenticity of the company's operating conditions.
Third, the company valuation method
The logic for conducting a company valuation is "value determines the price." The valuation methods of listed companies are usually divided into two categories: one is the relative valuation method; the other is the absolute valuation method.
1. Relative valuation method
The relative valuation method is simple and easy to understand, and it is also a valuation method widely used by investors. Among the relative valuation methods, commonly used indicators are price-earnings ratio (PE), price-to-book ratio (PB), and EV/EBITDA multiples.
The multiples obtained by using the relative valuation method are used to compare the relative valuation levels between companies in different industries and within the industry; the index values of companies in different industries cannot be directly compared, and the difference may be large. The relative valuation method reflects whether the current price of the company's stock is at a relatively high or relatively low level. By comparing different companies in the industry, companies that are relatively undervalued in the market can be identified. But this is not absolute. For example, the market gives the company a higher P/E ratio indicating that the market is more promising for the company's growth prospects and is willing to give a certain premium to the dominant companies in the industry. Therefore, when using the relative valuation indicators to analyze the company's value, it is necessary to combine the macroeconomics, industry development and company fundamentals, and specific company analysis.
Compared with the absolute valuation method, the advantage of the relative valuation method is relatively simple, easy to be mastered by ordinary investors, and also reveals the market's evaluation of the company's value. However, when there is a large fluctuation in the market, the price-to-earnings ratio and the price-to-book ratio are also relatively large, which may mislead the company's valuation.
2. Absolute valuation method
In the absolute valuation method, the commonly used dividend discount model and the free cash flow discount model adopt the income capitalization pricing method, which predicts the company's future dividend or future free cash flow, and then discounts it to obtain the company's stock. Intrinsic value.
Compared with the relative valuation method, the advantage of the absolute valuation method is that it can reveal the intrinsic value of the company's stock more accurately, but how to correctly select the parameters is more difficult. Future dividends, forecast deviations of cash flow, and selection bias of discount rates may affect the accuracy of valuation.
When investing in the value analysis of listed companies, investors need to combine various information such as macro, industry and listed company financial status, market valuation level, etc., and at the same time distinguish the main and secondary factors affecting the stock price of listed companies, sustainable factors and non- Sustained factors, an objective and rational value assessment of listed companies.
(The information published in this article is for the sole purpose of investor education and does not constitute any investment advice. Investors should not substitute such information for their independent judgment or make decisions based solely on such information. The Shanghai Stock Exchange strives for this column. The information published is accurate and reliable, but does not guarantee the accuracy or completeness of such information, and does not assume any responsibility for the losses caused or likely to be caused by the use of such information. For more information, please visit the SSE Investor Education website http: //edu.sse.com.cn)
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