Financial Valuation
1.In this report, the selection of the companies has done from Australian Stock Exchange. In this, it is found that 3 companies are selected from the information technology, 4 companies are selected from energy sector of Australia and 3 companies are selected from financial sectors.
| Million of AUD | Appropriate P/E ratio | Estimated earnings per share for year (AUD) | Value of ordinary share (AUD) |
| Iress Limited | 0.35 | 0.39 | 0.137 |
| Link Admin HLDG | 0.23 | 0.29 | 0.067 |
| Myob Group Limited | 0.1 | 1.14 | 0.114 |
| Origin Energy | -1.17 | 0.4 | -0.468 |
| Oil Search Limited 10 Toea | 0.25 | 0.23 | 0.058 |
| Soul Pattinson (W.H) | 1.39 | 1.27 | 1.765 |
| Santos Limited | -0.74 | 0.25 | -0.185 |
| Suncorp Group Limited | 0.84 | 0.75 | 0.630 |
| Westpac Banking Corp | 1.79 | 2.45 | 4.386 |
| Suncorp Group Limited | 0.84 | 0.75 | 0.630 |
Value of ordinary shares = Appropriate P/E ratio * Estimated earnings per share for year
2.
| Million of AUD | Appropriate P/E ratio | Estimated earnings per share for year | Value of ordinary share AUD |
| Origin Energy | -1.17 | 40 | -46.8 |
| Santos Limited | -0.74 | 25 | -18.5 |
| Oil Search Limited 10 Toea | 0.25 | 23 | 5.75 |
| Link Admin HLDG | 0.23 | 29 | 6.67 |
| Myob Group Limited | 0.1 | 114 | 11.4 |
| Iress Limited | 0.35 | 39 | 13.65 |
| Suncorp Group Limited | 0.84 | 74 | 62.16 |
| Suncorp Group Limited | 0.84 | 75 | 63 |
| Soul Pattinson (W.H) | 1.39 | 127 | 176.53 |
| Westpac Banking Corp | 1.79 | 245 | 438.55 |
- Selection of the company for the investment
| Million of AUD | Value of ordinary share (AUD) |
| Iress Limited | 0.137 |
| Link Admin HLDG | 0.067 |
| Myob Group Limited | 0.114 |
| Origin Energy | -0.468 |
| Oil Search Limited 10 Toea | 0.058 |
| Soul Pattinson (W.H) | 1.765 |
| Santos Limited | -0.185 |
| Suncorp Group Limited | 0.630 |
| Westpac Banking Corp | 4.386 |
| Suncorp Group Limited | 0.630 |
In the financial market, investors select the companies on the basis of the value of the ordinary share. In this, it is found that Origin limited will be selected by the investors because there is a strong estimate that company will generate the highest growth in the context of the earning per share.
In the views of Warren Buffet, intrinsic value is able to estimate the actual value of the company instead of the precise figure. Due to this, it can be understood that intrinsic value defines the real and actual worth of the organisational assets in the market.
Under this method, the value of the organisational assets can be measured according to underlying perception in the business environment (Shouman et al., 2016). Intrinsic value provides the facility to investors to measure the value of the both kind of the assets such as the tangible assets and intangible assets.
Moreover, it is also found that intrinsic value provides the value for the value of the company on the basis of the fundamental analysis. But, at the same time, it avoids also the market value of the company. It is the main cause intrinsic value of the company is also called the fundamental value.
The intrinsic value determines the two primary connotations in the evaluation process of te company or assets. Along with this, it also has an objective to identify the variance between the market value of underlying the security of the organisation.
It is also helpful to determine the comparison between underlying stock price in the financial market and strike price of the stock (Nesticò and Pipolo, 2015).
Comparison between warren buffet approach and share valuation methodology
In the financial evaluation, it is also found that the approach developed by the Warren Buffet depicts the estimation value of the company’s assets instead of the precise figure. In the context of this, it is found that this approach is able provides
the idea of the actual value of the organisation assets and worth. In the financial market, this approach is able to determine the actual financial performance of the company in the world for an investor (Babbush et al., 2014).
Beside of this, share valuation methodology is quite different from this approach because it is based on the some formulas and principles. In this, it is found that share valuation methodology have the three different methods such as the balance sheet method, discounted cash method and relative valuation method.
In this, it is found that when investors concern to use the balance sheet method then the evaluation is based on the whole information of the balance sheet. Under this method, the main formula that used by the investors is based on the assets and liability. In this, investors use Total assets – ( total liabilities + payment of preference share holders).
Moreover, it is also found that when investors use the discounted cash flow method then they use the some facts and figure (Dewachter et al., 2015). It enables them to get the value of the organisation in the market. However, under this method, the analyser has to use the some assumptions due to this method is not much reliable.
Additionaly, in the context of the relative valuation technique allows the investors to compare a company value with another organisation value. It is effective method to determine the worth of the company. Due to this, it is also called the comparable method of the valuation.
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Dewachter, H., Iania, L., Lyrio, M. and de Sola Perea, M., 2015. A macro-financial analysis of the euro area sovereign bond market. Journal of Banking & Finance, 50, pp.308-325.
Kallala, R.F., Vanhegan, I.S., Ibrahim, M.S., Sarmah, S. and Haddad, F.S., 2015. Financial analysis of revision knee surgery based on NHS tariffs and hospital costs: does it pay to provide a revision service?. Bone Joint J, 97(2), pp.197-201.
Nesticò, A. and Pipolo, O., 2015. A protocol for sustainable building interventions: financial analysis and environmental effects. International Journal of Business Intelligence and Data Mining, 10(3), pp.199-212.
Shouman, E.R., El Shenawy, E.T. and Khattab, N.M., 2016. Market financial analysis and cost performance for photovoltaic technology through international and national perspective with case study for Egypt. Renewable and Sustainable Energy Reviews, 57, pp.540-549.
