Case Study
Conducting an equity valuation exercise of large tech companies for a London-based private bank
Valuation analysis | Stock performance analysis | Investment management loans
Business need
- For its upcoming Investment Management meeting, a London-based private bank wanted to assess whether the tech sector was in a bubble.
- It also wanted to explore the drivers behind the rebound of the technology companies as their stock prices had shot up.
To identify the drivers behind the rebound of technology companies and their rising stock prices.
The client outlined two key reasons for selecting RocSearch:
- Our extensive experience in conducting equity valuation and analysing stock market performance.
- Our experienced team of investment researchers with global exposure.
Approach and Methodology
- Our financial advisory team conducted valuations of various leading global tech companies such as Microsoft and Zoom using the Discounted Cash Flow approach.
RocSearch conducted a valuation exercise of leading tech companies, examining the drivers behind surging stock prices and future scenarios.
- We assessed various factors and the extent to which they contributed to the surge in stock prices, such as changes in growth forecasts and interest rate decline.
- We evaluated likely scenarios and the impact they were likely to have on the technology stock prices by challenging several growth assumptions.
Business Outcomes
- Based on our research, we concluded that the changes in growth forecasts contributed the most to the increase in valuations for tech companies.
- We also concluded that although valuations were high, there were no bubble-like conditions similar to the Dot-Com era.
- The client decided to maintain a positive stance on the tech sector in the portfolio.
The client decided to maintain a positive stance on the tech sector in its portfolio.
