| Abstract [eng] |
Theoretically, market price of a stock in efficient market should be equal to its intrinsic value. Nevertheless publicly agreed, that market is not fully efficient. That is why stock should be evaluated and its real intrinsic value should be determined as well as compared to market price before investing. This paper investigates ones of the oldest fundamental stock valuation models that have heaviest economic substantiation: dividend discount model and price – earnings model. However, unknown application efficiency of these models is identified in emerging, young and unchecked stock markets. That is why the goal of this paper is to analyze stock valuation models and evaluate their application possibilities and efficiency in Lithuanian stock market. Dividend discount model and price – earnings model are analyzed, their application possibilities as well as benefit are determined. Research of their application efficiency in Lithuanian stock market is performed: the intrinsic values of years 2001-2007 are calculated using both models according data of following three years. Intrinsic values are compared with market prices. Investment decisions are made according those comparisons. Moreover, using information of intrinsic values and made investment decisions, investment portfolios are constructed. While dividend discount model have been tested, it was ascertained that this model can be applied in Lithuanian stock market and in most cases could determine undervalued stocks – extremely important to medium and long term investors. Model should be applied to old and mature companies, that has steady and performance reflected dividend payoff policy. After price – earnings model test it was determined, that model could be successfully applied in Lithuanian stock market for making investment decisions. It was also determined, that this model is efficient tool for searching undervalued stocks. Price – earnings model should be applied in growth stage while believing in forecasts of company growth. Study consists of 60 pages where 11 tables and 10 figures are provided. Study comes with lists of abbreviations and used literacy as well as 19 annexes. |
