RELATIVE VALUATION OF STOCKS: EVIDENCE FROM THE LISTED CEMENT MANUFACTURING COMPANIES OF BANGLADESH
Keywords:
Fundamental analysis, Comparables, Valuation, Absolute valuation, Relative valuation, Multiple analysis, Screening on multiplesAbstract
The paper aims to apply the relative valuation technique to the listed cement manufacturing companies of Bangladesh and address whether they are mispriced (overvalued/undervalued) or not. It considers the financial information of seven listed cement manufacturing companies of Bangladesh. All the financial data used in this study has been collected from the annual reports published in their websites for the financial year 2020-2021. On the contrary, closing prices of their stocks for the same year has been collected from the website of the Chittagong Stock Exchange (CSE), one of the two major stock exchanges of Bangladesh. The study reveals that in terms of the selected multiples (PS, PE and PB) all the sample companies are undervalued. But when comparison is made in terms of the relative value and the market value, six companies except one were found undervalued. This implies that despite their strong financial and operating performance, the stocks of the listed cement manufacturing companies are not correctly priced.
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