Introducing and Testing the ZZ Growth Model for Stock Valuation

Abstract

This paper aims to introduce a new model for stock valuation called the ZZ growth model, as well to measure its power compared to the Gordon model in estimating the intrinsic value of stocks. To test the power of the ZZ growth model in determining the fair value of the stocks of companies in the Iranian stock market, after calculating the average growth rate and the required payback period of the companies in the sample and according to their EPSs in the fiscal years 2020-2022, the values of the selected stocks in the mentioned years have been estimated and determined using this model. In the next stage, the Gordon model has been used to determine the values of companies' stocks. Finally, the values estimated using these two models and the deviation of each of them from the average adjusted stock market prices through the Independent Samples T-test, have been compared. The research findings indicate that in each of investigated industries, the ZZ growth model compared to the Gordon model, has been able to estimate the value of stocks with much higher accuracy.

Keywords

• stock valuation
• the zz growth model
• required payback period
• the gordon model
• iranian stock market