Abstract:

Company value is a concept that emerges by taking into account all assets, liabilities, technology, human and intellectual capital and future cash flows of the company as a whole. In the perspective of modern finance approach, it is important for the relevant stakeholders to determine or estimate the firm value in the most appropriate way. Investors and firm owners want to know the real firm value due to developments in financial markets, mergers and acquisitions, public offerings, stock exchange listing and privatisation. In particular, persons and/or institutions making financial investments want to make investments by knowing what the real value of the companies traded on the stock exchange is. Because the relationship between the real value of the firm and the price traded on the stock exchange will affect the investment decisions of the investor. Although different technical analysis methods can be applied to determine firm value, the most prominent ones in the finance literature are Economic Value Added (EVA), Market Value Added (MVA), Free Cash Flows to Equity (FCFE) and Free Cash Flows to Firm (FCFF). In the literature studies, it has been determined that firm valuation analyses have been made with different valuation methods and as a result of the analyses, it has been determined that there is no consensus on an effective method in firm valuation. In this study, considering that the effectiveness of firm valuation methods may differ by sector, it is tried to determine which valuation method is effective for which sector. In this context, the aim of the study is to reveal which of the economic value added, market value added, free cash flows to equity and free cash flows to the firm methods have better predictive power in determining the market price of stocks with both model and sectoral comparison. For this purpose, 17 different companies operating in 19 non-financial sectors determined within Borsa Istanbul and having the largest asset value on 31/12/2022 are included in the research, while the share value is determined by basic analyses based on annual balance sheet and income statement data between 2018 and 2022, and the method that makes the best prediction is determined in the research constraint. Since TUPRS is the leader in the Industrial Index and Chemicals Index and THYAO is the leader in the Service Sector and Transport Sector, two companies in four sectors were included in the valuation. The firm values calculated with the valuation methods are based on the assumption that the information disclosed to the public is accurate. The data used in the study were obtained from IS Investment, Investing Web sites and Thomson Reuters Eikon programme. The compiled data were arranged in Excell and the share values of the firm as of 31/12/2022 were calculated by using economic value added, market value added, free cash flows to equity and free cash flows to firm methods. By comparing the values of the companies obtained according to four different methods with the market values dated 31/12/2022, the valuation method with high predictive power in the relevant sector was decided on the basis of the relationship between the actual value and the market value. According to the findings obtained as a result of the calculations, it was observed that the methods used in the research (EVA, MVA, FCFA and FCFE) gave different results in share price estimation. There is no evidence that a single valuation method gives the best results for all sectors. When the comparison is made with the realised value, it is concluded that the technical analysis method that gives the best results varies across sectors. However, in general, it is determined that FCFE and MVA methods are effective in more sectors. Since model and sectoral differentiation has a direct impact on the results, it can be claimed that keeping the range of analyses and evaluations of all stakeholders wide can make a positive contribution to the investment decision processes.

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