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Graham's Formula for Valuing Growth Stocks
... Afterwards, in order to capture the effect of differences in company size based on market capitalization as at 2018, a requirement for addressing hypothesis three, this study will divide the 62 sampled companies according to Aigner and Schrabmair (2020) first into 6 categories where firms with market capitalization of up to $50 million are regarded as Nano Cap firms, $50million to $250million are regarded as Micro Capitalization Firms, $250million to $2billion Mid-Capitalization $2billion to $10billion, Large Capitalization $10billion to $200billion Mega Capitalization above $200billion. Then later on the sampled firms will be divided into 2 groups so that Nano Cap and Micro Cap organizations are referred to as smaller companies while Mid, Large and Mega Corporations are regarded as Larger companies. ...
This study examined the long-run effect of financial leverage on firm value with evidence from a sample of 62 firms quoted on the Nigerian Stock Exchange, over the five-year period between 2014-2018. The level of financial leverage as measured by the Debt-Equity ratio while firm value was represented by Tobin's Q Market-Book Value Ratio. The study contributes to the literature by appraising the dynamic dimensions of the causal relationship between firm value and financial leverage, an investigation that has remained elusive in indigenous studies. The study determined the degree of long-term causality by employing an auto-regressive model estimated by the Generalized Method of Moments (GMM) technique. The regression results show that financial leverage has a significant positive effect on the firm value both in the short and long run, while the result of the correlation analysis carried out reveals that there is a significantly positive and strong linear relationship between the time series of firm value and its lagged version implying that firm value does not demonstrate traits of Mean reversion. The Management of these companies was advised to optimize firm value by undertaking quality projects and relying more on debts for funding.
We present in this chapter the detailed analysis of the Dow Jones Industrial Average (DJIA) index using our system adaptation framework together with the influential factors selected in Chapter 3. The U.S. stock market is remarkably important not only because the U.S. national economy is the largest in the world, but also because it has great influence on other markets. Generally, global stock markets respond quickly and follow closely to the trend of the U.S. market, especially in abnormal situations when the market is highly volatile.
At a time like the present, when investors are avidly seeking opportunities for appreciation, it is appropriate to consider the difficulties of appraising growth stocks. There is little doubt that when other things are equal the forward-looking investor will prefer stocks with growth potential to those without. But other things rarely are equal - particularly in a sophisticated market that is extremely sensitive to growth. When the growth potential of a stock becomes widely recognized, its price is expected to react favorably and to advance far ahead of stocks lacking growth appeal, so that its price-earnings ratio and dividend yield fall out of line according to conventional standards. Then the choice between growth and lack of growth is no longer obvious, and the astute investors must ask whether the market price correctly discounts the growth potential.
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