To Study the Relationship between Return on Equity and the Intrinsic Value of the Stock in Basic Metals Industry Companies Listed in Tehran Stock Exchange (TSE)

Mahdi Mahdian Rizi, Sayyid Hossin Miri

Abstract


This is a continuous operation in the capital market using tools such as financial ratios and charts to measure the value of a stock and select the appropriate stock between stakeholders and financial decision makers. More common is the use of charts in the technical analysts and common between fundamental analysts using ratios and predictions. Financial decision makers and investors are seeking to find the best performance metrics, this issue has led the financial researchers’ part of Research and Development Programs spend for choice Best performance metrics. This paper examines the relationship between DuPont ratio that calculates the return on equity by the financial statements information and it is an accounting ratio  with the expected value of the stock that calculate the intrinsic value of stocks by using economic data. For above studies selected companies active in Basic metals industries Tehran Stock Exchange during the five year period from 1386 to the end of 1390. The article used the Pearson correlation coefficient, to test the hypothesis and significant relationship between the variables. The result of this study suggests that, there is a significant relationship between the intrinsic value of stock and equity returns.

 


Keywords


DuPont analysis, Expected value, Return on equity, intrinsic value, Economic data.

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