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Model Vs. Market

Dow 30 Valuation Follow-Up

By October 29, 2015No Comments

Last month we posted a list of non-financial Dow 30 components with their target prices compared to the market prices. We classified the companies into 3 groups: undervalued (green arrows), fairly valued (yellow arrows), and overvalued (red arrows). The target prices were determined with the discounted cash flow valuation model in Excel. Here is how the 3 groups have performed since our post.

  • Undervalued (green arrows): 18% avg. return
  • Fairly valued (yellow arrows): 6% avg. return
  • Overvalued (red arrows): 8% avg. return

Interestingly the overvalued group has outperformed the fairly valued group. By far the undervalued group has been the best performer during the recent run up in equities.

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