STOCK

VALUATION
(Chapter 9)

GROUP 3
Firman Hangoluan Pratama S.

Mike Yuni M.

Peby Safitri

Rahayu Ramadhani
DEFINITION

In financial markets, stock valuation is the method of calculating theoretical values of companies and their stocks. The main
use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit from price
movement.

Dividends (D)
Source of External
Financing Common Stock
(Corporations)
Capital Gains (P)
9.1 The Present Value of Common Stocks
Dividends vs Capital Gains

 The goal in this section is to value common stocks.

 A stocks provides two kinds of cash flows. First, many stocks pay dividends on a regular basis.
Second, the stockholder receives the sale price when she sells the stock.
 Is the price of share of stock equaal to :
a. The discounted present value of the sum of next period’s dividend plus next period’s stock
price, or
b. The discounted present value of all future dividends ?
• Let’s start with an individual who will buy • Where does 𝑃1 come from ?
the stock and hold it for one year. She is • There must be a buyer at the end of year 1 is willing to
willing to pay 𝑃0 for the stock today. purchase the stock for 𝑃1 .
• This buyer determines the price by:

• 𝐷𝑖𝑣1 is expected dividend paid at year’s

end
• Substituting the value of 𝑃1
• 𝑃1 is the expected price at year’s end.
• 𝑃0 is the present value of the common
stock investment.
• R is the discount rate for the stock and the
expected return for investors to commit
funds to the stock.
• Where does 𝑃2 come from ?
• An investor at the end of year 2 is willing to pay 𝑃2 because of the
dividend and stock price at year 3.
• This process can be repeated ad nauseam.
• At the end, we are left with:

• Thus the price of a share of common stock to the investor is

equal to the present value of all expected future dividends.
Contoh soal
• (Pembelian saham untuk 1 periode)
• Misalkan anda akan membeli saham PT. Coba-Coba Ah dan diharapkan perusahaan
tersebut akan membayar dividen Rp 2.000 setelah 1 tahun kemudian, dan anda berharap
dapat menjual saham tersebut saat itu Rp 14.000. Jika anda menghendaki hasil (return)
sebesar 20% , berapa harga maksimum yang akan anda bayar untuk saham tersebut?
Jawab:
Dik: 𝐷𝑖𝑣1 = Rp 2.000
𝑃1 = Rp 14.000 𝐷𝑖𝑣1 𝑃
• 𝑃0 = + 1
R = 20% 1+𝑅 1+𝑅
2.000 14.000
• 𝑃0 = +
1+0,2 1+0,2
• 𝑃0 = Rp 13.330
Contoh soal
• (Pembelian saham yang ditahan selama 2 periode)
• Sekarang, bagaimana bila anda bermaksud menahan saham tersebut selama 2 tahun? Di
samping dividen tahun pertama, anda berharap mendapatkan dividen sebesar Rp2.100
pada tahun kedua dan harga jual saham pada akhir tahun kedua sebesar Rp 14.700. Berapa
harga yang akan anda bayar untuk saham tersebut?
Jawab:
Dik: 𝐷𝑖𝑣2 = Rp 2.100 𝐷𝑖𝑣1 𝐷𝑖𝑣2 𝑃2
• 𝑃0 = + +
1+𝑅 (1+𝑅)2 (1+𝑅)2
𝑃2 = Rp 14.700 2.000 2.100 14.700
• 𝑃0 = + +
1+0,2 (1+0,2)2 (1+0,2)2

• 𝑃0 = Rp 13.330
Contoh soal
• (Pembelian saham yang ditahan selama 3 periode)
• Akhirnya, bagaimana jika anda bermaksud menahan saham tersebut selama 3 tahun? Di
samping dividen yang diperoleh tahun pertama dan kedua, anda berharap mendapat
dividen sebesar Rp 2.205 pada akhir tahun ketiga dan saham tersebut diharapkan laku
terjual sebesar Rp 15.435. Berapa harga yang akan anda bayar untuk saham tersebut?
Jawab:
Dik: 𝐷𝑖𝑣3 = Rp 2.205
𝑃3 = Rp 15.435

𝐷𝑖𝑣1 𝐷𝑖𝑣2 𝐷𝑖𝑣3 𝑃3

• 𝑃0 = + + +
1+𝑅 (1+𝑅)2 (1+𝑅)3 (1+𝑅)3
2.000 2.100 2.205 15.435
• 𝑃0 = + + +
1+0,2 (1+0,2)2 (1+0,2)3 (1+0,2)3
• 𝑃0 = Rp 13.330
Valuation of different types of stocks
 The dividends are expected will grow, decline, or stay the same.
• The general dividend growth models of stocks :

I. Zero Growth
II. Constant Growth
𝐷𝑖𝑣1 𝐷𝑖𝑣2 𝑃0 III. Differential Growth
𝑃0 = + +⋯ 𝐷𝑖𝑣 𝐷𝑖𝑣 1 + 𝑔
1 + 𝑅 (1 + 𝑅) 2
= + 𝑃0
𝑻
𝑫𝒊𝒗 1+𝑅 1+𝑅 2 𝑫𝒊𝒗(𝟏 + 𝒈𝟏 )𝒕 𝑫𝒊𝒗𝒓+𝟏
= 𝐷𝑖𝑣 1 + 𝑔 2 𝐷𝑖𝑣 1 + 𝑔 3
=෍ +
𝑹 + + (𝟏 + 𝑹) 𝒕 𝑹 − 𝒈𝟐
1+𝑅 3 1+𝑅 4 𝒕=𝟏
𝑫𝒊𝒗 𝟏
+⋯= ×
𝑹−𝒈 (𝟏 + 𝑹)𝑻
Figure 9.1 Zero Growth, Constant Growth, and Differential Growth
Patterns.
Contoh soal
• (zero growth)
• Suatu saham diharapkan membayar dividen sebesar $10 per lembar saham setiap
tahunnya. Berapakah nilai selembar saham tersebut jika tingkat pengembalian yang
diharapkan adalah 20%?
Jawab:

Dik: Div = $10 perlembar saham

R = 20%

𝐷𝑖𝑣 $10
𝑃0 = = = $50 𝑝𝑒𝑟𝑙𝑒𝑚𝑏𝑎𝑟 𝑠𝑎ℎ𝑎𝑚
𝑅 0,2
Contoh soal
• (constant growth)
• Suatu perusahaan baru saja membayar dividen (𝐷0 ) sebesar $2,30 per lembar saham.
Diperkirakan perusahaan meningkatkan dividennya sebesar 5% setiap tahun. Jika tingkat
pengembalian yang diharapkan pasar atas aset berisiko adalah 13%, berapa harga jual
saham tersebut?
Jawab:

Dik: 𝐷𝑖𝑣0 = $2,30

g = 5% per tahun
R = 13%

𝐷𝑖𝑣(1+𝑔)
𝑃0 =
𝑅−𝑔
$2,30(1+0,05)
𝑃0 = = $30,19
0,13−0,05
Contoh soal
• (constant growth)
• The Anglo Mining Company will pay dividend of the stock to be a $3 a year from today.
This dividend is expected to grow at 10% per year for the foreseeable future. The investor
thinks that the required return (R) on this stock is 15%, given her assessment of Anglo
Mining’s risk. What is the price of a share of Anglo Mining Company’s stock?
Jawab:

Dik: 𝐷𝑖𝑣1 = $3
g = 10% per year
R = 15%

𝐷𝑖𝑣1
𝑃0 =
𝑅−𝑔
$3
𝑃0 = = $60
0,15−0,10
9.2 Estimates of Parameters in the Dividend Discount Model

Rate of Grow (g) Discount Rate (R)

• Retention ratio 𝑃0 =
𝐷𝑖𝑣
(𝑅 − 𝑔)
𝐷𝑖𝑣
1 + 𝑔 = 1 + Retention ratio x ROE 𝑅−𝑔=
𝑃0
𝐷𝑖𝑣
𝑅= +g
𝑃0
• Formula
• Formula

𝑹 = Dividend yield + Capital gains yield

g = Retention ratio x ROE 𝑫𝒊𝒗
𝑹= +𝒈
𝑷𝟎
Contoh soal
• Misalkan saham suatu perusahaan dijual dengan harga $20. Mereka membayar dividen sebesar $1 per
lembar saham dan dividen diharapkan tumbuh 10% pertahun selama waktu yang tidak dapat
ditentukan. Berapa besar dividen yield? Berapa besar capital gain? Berapa required return?
Jawab:
a) Berapa besar dividend yield?
𝐷𝑖𝑣 1
= 20 = 0,05 = 5%
𝑃0

b) Berapa besar capital gain yield?

g = 10%

c) Berapa required return?

𝐷𝑖𝑣
𝑅= +𝑔
𝑃0

1
𝑅= + 10% = 5% + 10% = 15%
20
9.3 Growth Opportunities

EPS = Div
(EPS is Earnings per share and Div is Dividends per share)  Cash cow

Value of a
share of Present
stock As a Cash cow :
Value
As of Date 0 is
NPVGO
𝐸𝑃𝑆 𝐷𝑖𝑣
=
𝑅 𝑅 Stock price after Firm
Commits to NP =
𝐸𝑃𝑆
+ 𝑁𝑃𝑉𝐺𝑂
𝑅
9.4 Comparables

• Price-To-Earnings Ratio
A stock’s price-to-earnings ratio is, as the same suggests, the ratio of the
stocks’s price to its earnings per share.

Market Value Per Share

PE =
Earning Per Share (EPS)

Example :
If the stock of Sun Aerodynamic Systems (SAS) is selling at $27.00 per
share and its earnings per share over the last year was $4.50, SAS’s PE
ratio would be 6 (=27/4.50)
• Enterprise Value Ratios
Enterprise value is equal to the market value of the firm’s equity plus the
market value of the firm’s debt minus cash.

EV = market capitalization + preferred shares + minority interest + debt

- total cash.

Example :
Indon Food Products Co. (IFPC) has equity worth $800 million, debt worth
$300 million, and cash of $100 million. The enterprise value here is $1
billion (=800 + 300 – 100).
9.5 Valuing the Entire Firm

Two Methods:
• Constant Growth Discounted Cash Flow Method
• PE Comparable Firms
*There is no best method, depend on situation.
An Example

PT. ACE Hardware Tbk

- Revenue growth forecasted by 6% after 5 year
- Discount Rate 16%
- Entire ACES Value?

Year (000.000) 1 2 3 4 5
Revenues 500.0 550.0 605.0 653.4 705.67
Expenses 300.0 330.0 363.0 392.04 423.40
Earning Before Taxes 200.0 220.0 242.0 261.36 282.27
Taxes (@ 0.40) 80.0 88.0 96.8 104.54 112.91
Earning After Taxes 120.0 132.0 145.2 156.82 169.36
Next investment 50.0 55.0 60.5 65.34 70.57
Net Cash Flow 70.0 77.0 84.7 91.48 98.79
An Example

1. Constant Growth Discounted Cash Flow Method

1. Net Cash Flow After Year-5? (Year-6)

= Net Cash Flow Year-5 x (1+ Growth Forecasted %)
= 98.79 x (1+0.06)
= 104.72

2. PV Year-5
Net Cash Flow Year−6
=
Discounted Rate Year 6 − Growth Forecasted

104.72
=
0.16 −0.06

= 1047.22
An Example

1. Constant Growth Discounted Cash Flow Method

3. PV Today
1
= PV Year − 5 x (1+𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑒𝑑 𝐹𝑎𝑐𝑡𝑜𝑟)𝑛

1
= 1,047.22 x = (1.16)5
= 498.59

4. PV After 5Y
70 77 84.7 91.48 98.79
= (1.16) + (1.16)2 + (1.16)3 + (1.16)4 + (1.16)5
= 269.39

Entire Valuation =498.59 + 263.39 = 767.98

An Example

2. PE Comparable Firms

- PE Assumption = 7X

1. PV 5-Years
= PE x Earning After Tax Year-5
= 7 x 169.36
=1,185.52

2. Entire Value
70 77 84.7 91.48 98.79 1,185.52
= (1.16) + (1.16)2 + (1.16)3 + (1.16)4 + (1.16)5 + (1.16)6
= 833.83
9.6 The Stock Markets

The Stock Market Consist of :

1. Primary Market
 Usual Transaction between buyers and sellers
 Limited transaction

2. Secondary Market
 Sometimes does by big money/ big investors
 Transaction above 1%
 Price is negotiable
The Stock Markets

Most Securities Transaction Involve Dealers and

Brokers:
1. Dealers
• WPEE (Wakil Penjamin Emisi Efek)
• Keep company stock shares

2. Broker
• WPPE (Wakil Perantara Perdaganga Efek)
• Middleman between investor and dealer
ORGANIZATION OF THE NYSE (CALLED IHSG IN INDONESIA)

Members: Total Participant whose join the Index

- NYSE had 1,366 Exchange Members, while IHSG had more than 500++ Exchange
Members

Operations:
- Before  Floor Activity : Stand and activities on Floor Trading at trading session.
- Current  ECN on USA, JATS on Indonesia: Called Electronic Communications
Networks, provide more efficient transaction on online system.
STOCK MARKET REPORTING
Stock Price Quoted and related information which generally provided by several news, securities, or trading website
like yahoo Finance, The Wall Street Journal.

The information consist of current price, volume, bid, ask, beta, etc.
Case Study (BioPharma Company)
Berdasarkan pertimbangan dari Perusahaan BioPharma, diharapkan terjadi peningkatan pertumbuhan pasar dalam rangka
mengeluarkan produk baru. dividen untuk saham biofarma setahun dari hari ini diharapkan $ 1,15. Selama empat tahun ke depan, dividen
diharapkan tumbuh 15% per tahun (g1 = 15%). Setelah itu, pertumbuhan (g2) akan sama dengan 10% per tahun.
Hitung nilai sekarang dari saham jika pengembalian yang diminta (R) adalah 15 persen.
Present Value dari pembayaran dividend pada tahun 1-5 adalah :

Present Value dari dividend yang dimulai pada akhir tahun ke-6
Harga pada tahun ke-5 adalah :
𝐷𝑖𝑣6 $2.215
𝑃𝑠 = = = $44.25
𝑅 − 𝑔2 0.15 − 0.10

Present value dari p5 pada hari ini adalah :

𝑃5 $44.25
5
= 5
= $22
(1 + 𝑅) (1.15)

Present value dari semua dividen pada hari ini adalah $27 ($22+$5)
Daftar Pustaka

Ross, S.A., R.W. Westerfield, J.Jaffe, J.Lim, R.Tan, and H.Wong. 2015. Corporate Finance:
Asia Global Edition. McGraw-Hill Education. New York, p. 277-303.
Contoh soal
• (differential growth)
• Consider BioPharma Company, which is expected to enjoy rapid growth from the introduction of its new
back-rub ointment. The dividend for a share of BioPharma’s stock a year from today is expected to be $1,15.
During the next four years, the dividend is expected to grow at 15% per year (𝑔1 = 15%). After that, growth
(𝑔2 ) will be equal to 10% per year. Calculate the present value of a share of stock if the required return (R) is
15%.
• 𝐷𝑖𝑣0 1 + 𝑔 4 = 1 1 + 0,15 4 = $1,7490
Jawab:
• 𝐷𝑖𝑣0 1 + 𝑔 5 = 1 1 + 0,15 5 = $2,0114
Dik: 𝐷𝑖𝑣1 = $1,15
𝑔1 = 15% (during the next four years)
𝑔2 = 10% (after 𝑔1 )
R = 15%
Present Value of First Five Dividends (𝑔1 = 15% )
• 𝐷𝑖𝑣0 (1+g) = 1 (1+0,15) = $1,15
• 𝐷𝑖𝑣0 1 + 𝑔 2 = 1 1 + 0,15 2 = $1,3225
• 𝐷𝑖𝑣0 1 + 𝑔 3 = 1 1 + 0,15 3 = $1,5209
Present Value of dividends beginning at end of year 6 (𝑔2 = 10% )
• 𝐷𝑖𝑣5 (1+g) = 2,0114 (1 + 0,10) = $2,2125
2 2
• 𝐷𝑖𝑣5 1 + 𝑔 = 2,0114 1 + 0,10 = $2,4338
3 3
• 𝐷𝑖𝑣5 1 + 𝑔 = 2,0114 1 + 0,10 = $2,6772
4 4
• 𝐷𝑖𝑣5 1 + 𝑔 = 2,0114 1 + 0,10 = $2,9449

• The price at the end of Year 5 is given by:

𝐷𝑖𝑣𝑡+1 𝐷𝑖𝑣5+1 𝐷𝑖𝑣6 $2,2125
𝑃5 = = = = = $44,25
𝑅−𝑔 𝑅−𝑔2 𝑅−𝑔2 0,15−0,10

• The present value of 𝑃5 as of today is:

Figure 9.2 Differential Growth Patterns
𝑃2 $44,25
= = $22
(1+𝑅)5 (1+0,15)5

• The present value of all dividends as of today is $5 + $22 = $27