Valuing U.S. Corporates by Applying Discounted Cash Flow Valuation

In the context of financial industry, there is always a possibility that companies’ stocks are traded at non-equilibrium prices on the stock market in comparison with their intrinsic values and potential growth in the future. Therefore, studying valuation is very important because it enables us to determine if companies are correctly valued by the stock market. To address this problem, a valuation model named Discounted Cash Flow has been used to determine intrinsic values of 100 U.S. corporates in ten different sectors. These companies are all currently operating and trading on New York Stock Exchange. This problem inherently requires working with a lot of numbers and calculations, therefore, a quantitative research has been conducted. Concerning data usage, secondary data has been used. Various types of historical data were collected, including seven-year historical accounting data from 2010 to 2016, daily stock performances of each company, and daily stock performances of the general stock market. Apart from that, a Discounted Cash Flow model has been built on Microsoft Excel to perform the valuation tasks with the aim of generating three types of values, including enterprise value, equity value, and equity value per share. The findings showed that the majority of 100 firms were undervalued in all three categories of values. In other words, these companies were underrated by the stock market. For enterprise value, while 53 firms across ten sectors were found undervalued, 47 firms were found overvalued. For equity value, while 55 firms across ten sectors were found undervalued, 45 firms were found overvalued. Finally, for equity per share, while 54 firms across ten sectors were found undervalued, 46 firms were found overvalued