Value Evaluation Based on FCFF Model during the Covid-19 Pandemic

Abstract

The study examines how companies that often distribute dividends may attract interest from public investors. However, the excessive information available to investors can lead to biases and uneven information. This research evaluates the value of a major Indonesian pharmaceutical company using historical data from 2017 to 2021. By applying the FCFF single-stage model, the study analyzes stock price assessment. Results indicate that due to optimistic investor views on performance and risks, the market overvalues the company. Despite the pandemic, the company's sales and profits improved, attributed to its defensive industry classification that shields it from market shifts. The study focuses on one company, highlighting the need for a larger sample size for broader insights. While the FCFF single-stage model is used here, using a multi-stage model for comparing various assumptions is recommended. The research establishes a fair stock price of around Rp. 573/share, revealing a 51.06% overvaluation compared to the market price, indicating the company's shares are overvalued.