Analysis, Company Valuation And Investment Strategies Based On The Dcf Model

Recently, with the rapid development of domestic economy, Chinese capital market flourishes and becomes one of the most important tools to enhance the healthy growth of economy, establish reasonable and effective system for investment and financing, improve the efficiency of allocation of resources. Under the care of government, all kinds of institute investors in China market, including security investment funds, insurance corporation, QFII and so on, become stronger than before, which changed the situation that individual investors dominated the stock market, and manipulation emerged in endlessly. Institute investors brought new investment theory and business model. They attached much importance on the value of investment. Value investing, simply speaking, is "trying to purchase something worth 1 dollar by paying 50 cents"(Buffett)But the key point is how do you know the commodity worth 1 dollar rather than 50 cents? Or even 10 cents? You have many choices when applying value investing. But how to assess the real value cannot be avoided, which confused lots of investors and caused great fluctuations in stock market.According to the theory of value investing, investors use different ways to assess the true value of the company. These tools include relative valuation, like PE,PB,EV/EBITDA, and absolute valuation, like DCF,DDM and RIM. The article attempts to analyze the discounting of free cash flow, and combined the specific listed company operation, in order to refine the application of DCF model in the investment behavior. In addition, the article still concerns about the strategy of investment in order to pursue maximizing the return with certain risk.