An Evaluation of the DDM Model and FCFF Model Using in valuing the Large Listed State-owned company——Taking China Mobile as An Example

Junyi Hu ()
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Junyi Hu: Fudan University

A chapter in Proceedings of the International Workshop on Navigating the Digital Business Frontier for Sustainable Financial Innovation (ICDEBA 2024), 2025, pp 384-393 from Springer

Abstract: Abstract This article introduces the basic role and methods of company valuation and then link the valuation of the listed company to the value of its stock. Listed state-owned companies hold an important position in the Chinese financial market. This article evaluates the advantages and disadvantages of the dividend discount model and the free cash flow to the firm model in the valuation of large listed state-owned companies. Taking China Mobile as an example, two models were used to calculate the value per share and compare it with the value per share evaluated by authoritative institutions. The results obtained from both models overestimate the value of the company’s stock, with FCFF having a larger error and is almost ineffective in valuing China Mobile. This is related to the special nature of China Mobile, like the cyclical characteristics of this company and its functions of infrastructure construction. And it also related to the COVID-19 epidemic in 2019-2022.

Keywords: company valuation; dividend discount model; free cash flow to the firm model; infrastructure construction with non-profit; cyclical (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-652-9_40

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DOI: 10.2991/978-94-6463-652-9_40

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