Determining the Valuation of OMXH 25 Stocks by Utilizing the Gordon Growth Model

Abstract

Investing is considered to be a great way to manage one’s wealth. Investors seek to gain return with differ- ent strategies chosen and many of those strategies include defining intrinsic value of stock and comparing it to the market price. The current economic environment is putting pressure on investors and companies alike and thus, effective wealth management is vital. Based on value investing philosophy, this environment is creating higher dispersion in prices a d hence possible inefficiencies in market valuations. Current research is implementing a form of fundamental analysis called Gordon Growth Model to deter- mine intrinsic value for a stocks of OMXH 25 companies. This fundamental analysis was supported by tech- nical analysis to gain a higher conviction on the recommendations. The study aims to, based on determined value and by comparing it to market price, determine whether inefficiently priced stocks can be found on the market. Furthermore, how an investor could benefit from these. Results of the study implied that through fundamental analysis that it was possible to detect undervalued stocks. Furthermore, it revealed that the majority of benchmark stocks were undervalued and thus a possi- ble opportunity for one to capitalize from this. The findings of this research contribute to offer practical insights for investors to navigate on the markets, additionally to academic discourse of value investing. By determining the intrinsic value for a stock investor might be able to capitalize from market inefficiencies and gain valuable insight on how to make informed investing decisions.