INVESTMENT DECISIONS BASED ON FUNDAMENTAL ANALYSIS OF SHARE PRICES OF ELEKTROKRAJINA a.d. BANJA LUKA
DOI:
https://doi.org/10.7251/ZREFIS1206189MKeywords:
Fundamental analysis, market share price, intrinsic value of shares, discounted cash flows, relative evaluationAbstract
The latest wave of economic crisis has influenced strongly the volatility of share prices in the capital market of the Republic of Srpska. The basic research questions to which answers are required in making investment decisions are: whether the prices of shares are undervalued or overvalued, whether the price is determined by specific and measurable factors and whether it is predictable for investors. The market price of shares can significantly deviate from the real-intrinsic value of shares. Making investment decisions in such circumstances requires quantitative analysis with the aim of determining the real-intrinsic value of shares. In this paper, the method of fundamental analysis of share prices will be used as a basic concept of assessing the value, ie. intrinsic evaluation of value of the shares. The main goal of fundamental analysis is identifying the weaknesses of the market during the formation of market share price, through elaborating the amount of deviation of the market price of shares relative to the real-intrinsic value of shares. The paper presents an analysis of share prices that make up the index of Electric Power Company of the Republika Srpska (ERS10). The aim of the paper is to elaborate underestimation or overvaluation of share prices of the company Elektrokrajina a.d. Banja Luka (EKBL-R-A) based on fundamental analysis of the company's share prices. As a result, analysis and mathematical interpretation of the economic doctrine of fundamental analysis and its application in the capital market of the Republika Srpska, as shown using the example of Elektrokrajina a.d. Banja Luka, indicated the possibility of decision-making on investing into securities based on this theoretical concept.References
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