Business, Management and Accounting
6 years ago

Residual earnings technique dominates in achieving fair value on equity valuation.

SSRN Electronic Journal
A Comparison of Residual Earnings, Discounted Cash Flow and Adjusted Earnings Approaches in Capital Market for Achieving Fair Value on Equity Valuation
Zahra Poorzamani, Reza Daghani

Paper Summary

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The article compares different methods for valuing companies' stocks. It looks at residual earnings, discounted cash flow, and adjusted earnings techniques. The researchers studied 60 companies in the Tehran stock exchange from 2000 to 2008. They found that residual earnings techniques are better than free cash flow and adjusted income approaches for valuing companies. The study shows that these techniques can help investors make better decisions about buying or selling stocks.