Usage of P/E earning models as a tool for valuation of shares in condition of global market

Chutka, Jan; Kramárová, Katarína

doi:10.1051/shsconf/20207401007

Cited by 8 publications

(4 citation statements)

References 8 publications

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“…Their model correctly identifies 86.4% of fraudulent Slovak companies and reaches an 84.1% overall classification ability. Chutka and Kramarova (2020) sum up the calculation and usage options of P/E (price/earnings) models. Their study compares the P/E ratio model to the moving average of 24 situations.…”

Section: Discussionmentioning

confidence: 99%

Creative Accounting as an Apparatus for Reporting Profits in Agribusiness

Blazek

Ďurana

Valášková

2020

JRFM

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The economic results of a company are an important tool for many entities, e.g., for internal entities as well as for external entities. As the economic results of a company are often the only source of information that informs the company’s partners about the managerial activities of their company, it is necessary to present these economic results using real numbers. However, companies prefer to achieve better results by applying the principles of creative accounting, which leads to improved economic values being shown to be achieved during an accounting period. The purpose of this article is to apply models that have been developed to detect creative accounting, which occurs under conditions that help enterprises to adjust their financial statements and tax bases and involves using creative accounting techniques to become competitive or to be able to take advantage of deductions. These models were applied to the Slovak Republic’s agriculture, forestry, and fishing sector (sector A), which is highly affected by earnings manipulation. This article provides a numerical expression of companies, which were previously, with some probability level, involved in conducting financial statement manipulation. Subsequently, the results that were obtained have been displayed using receiver operating characteristic (ROC) curves. The outputs of the analysis show that a large proportion of the companies in this sector tend to use creative accounting, which is not only harmful for entrepreneurs and their business partners in sector A, but also for the Slovak Republic at large, as the Slovak government cannot determine whether the reported accounting results reflect a company’s real financial situation.

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Section: Discussionmentioning

confidence: 99%

Creative Accounting as an Apparatus for Reporting Profits in Agribusiness

Blazek

Ďurana

Valášková

2020

JRFM

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“…The firms’ selection criterion was based on year-wise price earnings ratios (PER); a firm with a PER lower than the sample median value was selected in the sample. The underlying idea is that the stock below the median PER is undervalued and signifies potential for higher returns [ 21 , 22 ]. The choice of pairs was made through Johansen cointegration, which is the most effective way to identify stocks that move together [ 15 ].…”

Section: Methodsmentioning

confidence: 99%

An Entropic Approach for Pair Trading in PSX

Amer

Islam

2023

Entropy

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The perception in pair trading is to recognize that when two stocks move together, their prices will converge to a mean value in the future. However, finding the mean-reverted point at which the value of the pair will converge as well as the optimal boundaries of the trade is not easy, as uncertainty and model misspecifications may lead to losses. To cater to these problems, this study employed a novel entropic approach that utilizes entropy as a penalty function for the misspecification of the model. The use of entropy as a measure of risk in pair trading is a nascent idea, and this study utilized daily data for 64 companies listed on the PSX for the years 2017, 2018, and 2019 to compute their returns based on the entropic approach. The returns to these stocks were then evaluated and compared with the buy and hold strategy. The results show positive and significant returns from pair trading using an entropic approach. The entropic approach seems to have an edge to buy and hold, distance-based, and machine learning approaches in the context of the Pakistani market.

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“…To further confirm whether the stock price of LVMH is overvalued or undervalued, the time factor is taken into account. Forecasts are made on the expected revenue in the future to predict the future P/E ratio of the industry [10]. The share price of LVMH group continued to grow from below 500 in 2020, once exceeded 700 from around 500 in 2021, and remained at around 650 euros after the rapid growth after the epidemic.…”

Section: P/e Ratiomentioning

confidence: 99%

Business Situation and Evaluation of LVMH

Ding¹,

Lang²,

Yao³

2023

BCPBM

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This article contributes to investigating the financial situation and company value of Louis Vuitton Moët Hennessy. Referring to the financial reports of LVMH and its luxury industry competitors Hermès, Kering, and Richemont for 2019-2022, multiples are calculated to make comparisons. There is an analysis of LVMH's business statistics such as earnings, debt ratios, payback periods, etc. Two main methods are used in the evaluation process. The first method, called EBITDA/EV, is also considered a multiple of the business value and is primarily used to assess a company's profitability. The second valuation is based on the price-to-earnings ratio and forecasted future earnings. It is used to see if LVMH's stock price is too high or too low. The results show that LVMH is overrated. The researchers also elaborate on the impact that overvalued prices can have on investors’ decision-making, and make recommendations on the future development of LVMH in terms of product manufacturing, brand image maintenance, and sales channels expansion.

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Usage of P/E earning models as a tool for valuation of shares in condition of global market

Cited by 8 publications

References 8 publications

Creative Accounting as an Apparatus for Reporting Profits in Agribusiness

Creative Accounting as an Apparatus for Reporting Profits in Agribusiness

An Entropic Approach for Pair Trading in PSX

Business Situation and Evaluation of LVMH

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