Assess the profitability of fundamental analysis with present a model for the construction of the fundamental power variable using factor analysis

Subject Areas : Financial Knowledge of Securities Analysis

Saeed Fathi ¹ , Ali safari ² , Mahbobeh Jafari mazaheri kalahrodi ³

1 - دانشیار گروه مدیریت، دانشکده علوم اداری و اقتصاد دانشگاه اصفهان
2 - استادیار گروه مدیریت، دانشکده علوم اداری و اقتصاد دانشگاه اصفهان
3 - کارشناسی ارشد گروه مدیریت، دانشکده علوم اداری و اقتصاد دانشگاه اصفهان

Received: 2014-10-24 Accepted : 2015-01-10 Published : 2015-12-22

Keywords: Stock Return, Fundamental analysis, Intrinsic Value, investment, Fundamental Power,

Abstract :

The investors should select which stocks to invest that maximize their wealth in the future. The present study attempts to analyze the relationship between fundamental power of stock and real return through developing an overall variable through combination of different fundamental models. This study was conducted for predicting the best intrinsic value for investors. To do this, a sample of 35 companies which listed in Tehran Stock Exchange in chemical, petroleum, and steel industries were survey foreseen financial statemen in 2012. This study, was use for produce fundamental power from factor analysis and for valuation producted fundamental power profitability from Correlation Coefficient. The findings revealed that profitability of fundamental power is resulted from P/E ration and economic value added (EAV) model which has a positive relationship with weekly and monthly return. In addition, The findings also revealed that the use of fundamental power is resulted from Gordon Growth Model (GM) and Free Cash Flow to Equity (FCFE) has not considerable profitability for weekly and monthly investment.