The Investment on Capital Market: From Target Price Valuation Models to Investor Final Decision

Abstract

The investments on capital market are more attractive nowadays considering the short-term potential earnings that this particular market can offer but also the opportunities generated by the new entry companies. The aim of the paper is to present different valuation models of share in order to identify/calculate a target price, on one hand, and to emphasize the impact of both internal and external information on price per share, on the other hand. The target price is an important instrument that drives, alongside with industry, financial, and risk analysis, the investment decision to buy, to hold, and to sell. The key issues in determining target price are equity analysis, cash flow forecasts, dividend forecast, peer valuation, and so on. But even if a fair/true target price of a given share according to valuation models was established, the external information (from the macroeconomic environment or related to the government policies) could have a huge impact on price per share and on investor decision to buy, to hold, or to sell.