ALLANA MANAGEMENT JOURNAL OF RESEARCH, PUNE - Volume 7, Issue 1, January 2017 - June 2017

Pages: 5-13

Date of Publication: 30-Jun-2017

SIMULATION MODEL VS. TRADITIONAL STOCK VALUATION IN DISCOVERY OF TARGET PRICE

Author: Dr. Pankaj Sharma, Dr. Manish Sinha

Category: Financial Management

Abstract:

The purpose of this paper is to prove the superiority of fundamental analysis over simulations based on Markov process. The authors apply Relative Valuation model using price to earning & price to book value and Discounting Cash flow method under fundamental analysis. We used simulations based valuation on Markov process to establish the superiority in estimating the stock price is observed that the fundamental methods have given us much close value than the values calculated by the Simulation methods which are giving statistically insignificant values as compared to the market price of the stock

We have done this analysis for only one company Oluman Pharmaceuticals and Chemicals Limited in the pharmaceutical sector. The study is based on secondary data i.e. financials of the company published/uploaded on Bombay stock exchange, annual report submitted to ministry of company Affairs and various valuation patterns by different agencies like Bloomberg. The present studies shows superiority of fundamentals analysis over technology-based valuation the simulations based on Markov process This paper compares equity valuation under-stimulation and traditional way of stock valuation using either multiples live P/E or P/B or DCF model under fundamentals of companies

KEYWORDS Equity Valuation, Discounting Cash Flow (DCF) Models, Relative Valuation, Simulation, Mark Process, Price to Earning(P/E), Price to Book (P/B)