INTRINSIC VALUES OF COMMON STOCKS

Abstract

The use of fundamental analysis in the common stock area is to assist an investor in selecting attractive stock. Normally, an investor makes decisions based on matters such as the nature of the business, the relative position of the individual company in its industry, the intensity of competition in the market place, the character of the management and the longer-term outlook for the company. As a result of the use of the Discounted Cash Flow (DCF) method, company studies have been made more quantitative and a move toward more specific value has developed so that a stock is deemed 'cheap' or 'attractive' according to the relationship of its intrinsic value and the current market price. The DCF is one method for determining both the absolute and the relative attractiveness of the common stock issues. This dissertation attempts to find out how this method can be applied in the local context.