Published in «Russian Journal of Entrepreneurship»24 / 2016
DOI: 10.18334/rp.17.24.37205

The research of the use of DCF method for determining target share prices of Russian public corporations

Zhabunin Anton Yu., Candidate of Science, Economics, Associate Professor of the Chair of Economics and Management, Volzhsky Polytechnic Institute (branch) of Volgograd State Technical University, Volzhsky, Russia

Ievleva Natalia V., Candidate of Science, Economics, Associate Professor of the Chair of Economics and Management, Volzhsky Polytechnic Institute (branch) of Volgograd State Technical University, Volzhsky, Russia

Cherednichenko Irina A., Candidate of Science, Philosophy, Associate Professor; Associate Professor of the Chair of Economics and Management, Volzhsky Polytechnic Institute (branch) of Volgograd State Technical University, Volzhsky, Russia

Sokolova Alla V., Senior Lecturer of the Chair of Economics and Management, Volzhsky Polytechnic Institute (branch) of Volgograd State Technical University, Volzhsky, Russia

Исследование применения метода DCF для определения целевых цен акций российских публичных корпораций - View in Russian

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Abstract:
In the article, it has been shown that the use of DCF method by financial analysts for the appraisal of shares of Russian public corporations (evidence from PAO “Lukoil“) provides unsatisfactory results in terms of price forecast reliability. The authors have identified a circle of problems to solve for making possible an analysis of the causes of errors in forecasts. The influence of such factors as the forecast of free cash flow, appraisal of weighed average capital cost and the residual value on the price forecast precision has been studied. The authors reveal the flaws of the traditionally used Gordon model for calculating the residual value and substantiate propositions for its adjustment.
The research results may be of interest for financial analysts, financial executives of public companies, as well as for private and institutional investors.

Keywords:

cash flow discounting method (DCF), Gordon model, growth rates, investments, residual (terminal) value, target prices of shares of a public corporation, weighed average capital cost (WACC)

JEL-Classification: E22, G12, G17

Citation:
Anton Yu. Zhabunin, Natalia V. Ievleva, Irina A. Cherednichenko, Alla V. Sokolova (2016). The research of the use of DCF method for determining target share prices of Russian public corporations [Issledovanie primeneniya metoda DCF dlya opredeleniya tselevyh tsen aktsiy rossiyskikh publichnyh korporatsiy]. Russian Journal of Entrepreneurship, 17(24). (in Russian). – doi: 10.18334/rp.17.24.37205.


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