The Implementation of Value Investment Based on Various Indicators for the Building Materials Industry

Abstract

With the advent of post COVID-19 era, value investing strategy has popularized again in the global stock markets as the changing economic conditions, rising interest rates and different risk appetites. Therefore, it is reasonable to know how to distinguish between value stocks and growth stocks before investing. This paper aims to examine the application of value investment strategies based on the indicators’ performance of five companies selected from the building materials industry. Besides, valuation metrics are derived from three primary dimensions, i.e., growth, profitability and value per unit of growth. This study first identifies the classification and recent performance of value stocks and then compares the financial indicators of companies with value stocks. According to the analysis, the suitable P/E range of value stocks is from 10 to 20, with returns beginning to rise in 2021. By means of this method (utilizes one indicator to identify value stocks), researchers engaged in the financial industry may discover more characteristics about them. Moreover, results also illustrate that value stocks with excellent indicators are more endurable in preventing outside shocks, whereas growth stocks can outperform in profitability as long as they possess ever-increasing revenue and EBITDA. Thus, value investing still remains profitable and practical in the real world.