Question

Unlike bonds, stocks do not promise any fixed stream of cash flows to the stockholder. Stocks...

Unlike bonds, stocks do not promise any fixed stream of cash flows to the stockholder. Stocks are thus much more difficult to value because even if a company pays dividends, it is very difficult to estimate future dividend amounts with any degree of certainty.

In what situations would the information obtained from the industry peers of the company be appropriate to use in valuing a company? When would such (industry) information be inappropriate?

In the case where using industry information would be inappropriate for a company, what other information sources/methods can be considered?

Homework Answers

Answer #1

Stock Valuation can be done based on the Industry peers and it will be appropriate

1. When there is no company specific requirement with respect to valuation

2.Company is in the same phase of life cycle.

3.This is mostly used method for valuation of stocks by individual investors.

4.This is best method because it is taken from public data and authenticity of information obtained is also reliable.

Stock Valuation cannot be done based on the Industry peers and is required to use discounted cash flows method or walters model.

1.When the life cycle is different from the industry life cycle.

2.Company is going to enter in different field or any specific requirement or change in circumstances.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Unlike bonds, stocks do not promise any fixed stream of cash flows to the stockholder. Stocks...
Unlike bonds, stocks do not promise any fixed stream of cash flows to the stockholder. Stocks are thus much more difficult to value because even if a company pays dividends, it is very difficult to estimate future dividend amounts with any degree of certainty.   In general, how useful would any information obtained from the industry (i.e. from industry peers) of a company be for the purpose of valuing that company?
Illinois Bio Technologies Illinois Bio Technologies (IBTECH) was founded in Rosemont, Illinois, in 1992 by Kelly...
Illinois Bio Technologies Illinois Bio Technologies (IBTECH) was founded in Rosemont, Illinois, in 1992 by Kelly O'Brien, David Roberts, and Barbara Smalley. O'Brien and Roberts, both MDs, were on the research faculty at the Chicago Medical School at the time; O'Brien specialized in biochemistry and molecular biology, and Roberts specialized in immunology and medical microbiology. Smalley, who has a PhD, served a department chair of the Microbiology Department at the same school. The company started as a research and development...
Illinois Bio Technologies Illinois Bio Technologies (IBTECH) was founded in Rosemont, Illinois, in 1992 by Kelly...
Illinois Bio Technologies Illinois Bio Technologies (IBTECH) was founded in Rosemont, Illinois, in 1992 by Kelly O'Brien, David Roberts, and Barbara Smalley. O'Brien and Roberts, both MDs, were on the research faculty at the Chicago Medical School at the time; O'Brien specialized in biochemistry and molecular biology, and Roberts specialized in immunology and medical microbiology. Smalley, who has a PhD, served a department chair of the Microbiology Department at the same school. The company started as a research and development...
Illinois Bio Technologies Illinois Bio Technologies (IBTECH) was founded in Rosemont, Illinois, in 1992 by Kelly...
Illinois Bio Technologies Illinois Bio Technologies (IBTECH) was founded in Rosemont, Illinois, in 1992 by Kelly O'Brien, David Roberts, and Barbara Smalley. O'Brien and Roberts, both MDs, were on the research faculty at the Chicago Medical School at the time; O'Brien specialized in biochemistry and molecular biology, and Roberts specialized in immunology and medical microbiology. Smalley, who has a PhD, served a department chair of the Microbiology Department at the same school. The company started as a research and development...
Four Case Studies on Corporate Social Responsibility: Do Conflict Affect a Company's Corporate Social Responsibility: Apple...
Four Case Studies on Corporate Social Responsibility: Do Conflict Affect a Company's Corporate Social Responsibility: Apple Inc. Apple’s profile Apple Inc. (hereafter Apple) was established in 1977 and is registered on the NASDAQ Global Select Market exchange. According to its Form 10-K ‘Apple designs, manufactures and markets mobile communications, media devices, personal computers and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications’. Its products are sold through...
Sign In INNOVATION Deep Change: How Operational Innovation Can Transform Your Company by Michael Hammer From...
Sign In INNOVATION Deep Change: How Operational Innovation Can Transform Your Company by Michael Hammer From the April 2004 Issue Save Share 8.95 In 1991, Progressive Insurance, an automobile insurer based in Mayfield Village, Ohio, had approximately $1.3 billion in sales. By 2002, that figure had grown to $9.5 billion. What fashionable strategies did Progressive employ to achieve sevenfold growth in just over a decade? Was it positioned in a high-growth industry? Hardly. Auto insurance is a mature, 100-year-old industry...
Discuss ethical issues that can be identified in this case and the mode of managing ethics...
Discuss ethical issues that can be identified in this case and the mode of managing ethics Enron finds itself in this case. How would you describe the ethical culture and levels of trust at Enron? Provide reasons for your assessment. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among...
The Business Case for Agility “The battle is not always to the strongest, nor the race...
The Business Case for Agility “The battle is not always to the strongest, nor the race to the swiftest, but that’s the way to bet ’em!”  —C. Morgan Cofer In This Chapter This chapter discusses the business case for Agility, presenting six benefits for teams and the enterprise. It also describes a financial model that shows why incremental development works. Takeaways Agility is not just about the team. There are product-management, project-management, and technical issues beyond the team’s control. Lean-Agile provides...
What role could the governance of ethics have played if it had been in existence in...
What role could the governance of ethics have played if it had been in existence in the organization? Assess the leadership of Enron from an ethical perspective. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among the top Fortune 500 companies, collapsed in 2001 under a mountain of debt...
What tools could AA leaders have used to increase their awareness of internal and external issues?...
What tools could AA leaders have used to increase their awareness of internal and external issues? ???ALASKA AIRLINES: NAVIGATING CHANGE In the autumn of 2007, Alaska Airlines executives adjourned at the end of a long and stressful day in the midst of a multi-day strategic planning session. Most headed outside to relax, unwind and enjoy a bonfire on the shore of Semiahmoo Spit, outside the meeting venue in Blaine, a seaport town in northwest Washington state. Meanwhile, several members of...