Research On Value Evaluation Of M Company Based On FCFF Model

With the continuous development of China’s economy,people have gained a deeper understanding of wealth accumulation,gradually shifting from bank savings and other financial management methods to the stock market.Nowadays,in the stock market’s "drinking and taking medicine" drama market,the pharmaceutical industry has become a hot topic of discussion among investors.In addition,affected by the medical reform and the COVID-19,the relevant policies and measures introduced by China have brought new opportunities and challenges to the pharmaceutical track enterprises,and investors have focused more on the pharmaceutical industry.However,due to the lack of systematic learning and relevant knowledge required for stock investment by most investors,people often only focus on the short-term price of stocks and overlook the long-term value behind them when making investments.Therefore,systematic value evaluation of pharmaceutical enterprises,on the one hand,helps investors focus on the intrinsic value of the enterprise and make reasonable analysis and investment;on the other hand,it also helps business managers to understand the value trend of the enterprise in a timely manner,make better management decisions,and constantly improve the competitiveness and value of the enterprise.This article takes M Company in the pharmaceutical industry as the research object and conducts a valuation study on its corporate value based on the FCFF model.Firstly,by reviewing relevant literature at home and abroad,we will clarify the definition of enterprise value and its influencing factors,introduce the characteristics and applicability of the three commonly used valuation methods,and explain the rationality and application conditions of selecting the FCFF model based on the characteristics of the pharmaceutical industry.Secondly,introduce M company and analyze its competitiveness through PEST-SWOT.Select traditional financial indicators for analysis,and determine that M company has a good financial situation and development potential in recent years,which has strong applicability for using the FCFF model.Then,based on the data in the financial statements of M Company in the past five years,the ratio relationship between operating revenue and various indicators is used for analysis and calculation to predict the after tax operating net profit,depreciation and amortization in the next five years,and calculate the free cash flow of the company.By analyzing the capital structure of M Company,the CAPM model is used to calculate WACC as the Discount rate,and the enterprise value of M Company is calculated considering the future sustainable development period of the enterprise.Then,valuation tests are conducted using methods such as P/E ratio and P/L ratio,and the valuation results are compared with the stock market price on the evaluation benchmark date to verify the feasibility and accuracy of the FCFF model valuation results.Finally,propose relevant strategies to enhance the company’s value from aspects such as its main business,cost and expense,and capital structure.