Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)

Research Article: 2022 Vol: 26 Issue: 4

Fundamental Analysis from Value Drivers: The Case of Banking, Industrial, Consumer Goods, Healthcare and Tech Firms Listed on the Johannesburg Stock Exchange

Enow Samuel Tabot, IIE Vega School

Citation Information: Tabot, E.S. (2022). Fundamental analysis from value drivers: the case of banking, industrial, consumer goods, healthcare and tech firms listed on the johannesburg stock exchange. Academy of Accounting and Financial Studies Journal, 26(4), 1-11


Fundamental trends usually drive the market price of a stock. A healthy and good security is usually reflected in its fundamentals and can be used to provide the direction of trade for investors and investment practitioners. Fundamental drivers can last for years and at times minutes. The purpose of this study was to use fundamental value drivers to provide signals for stocks in the banking, industrial, consumer goods, healthcare and technology firms listed on the Johannesburg stock exchange (JSE). Using a sample of 56 firms from different sectors and a multiple regression analysis, the findings reveals that 50% of the largest 10 firms in the banking sector according to market capitalisation are undervalued. In the industrial sector, 44% of the largest 14 firms where undervalued. Furthermore, only 36% of the 14 largest firms in the consumer goods sector are undervalued while 44% and 45% of the largest 9 and 11 firms in the healthcare and Tech firms respectively listed in the JSE are undervalued. These findings can be used to provide suitable investment strategies for investors and industry practitioners.


Fundamental Analysis, Value Drivers, Market Efficiency, Asset Pricing, Johannesburg Stock Exchange, Price Earnings Ratio, Earnings Per Share.


Most firms have specific fundamental value drivers that can significantly propel the business to profitability because of the impact it has on the success of the firm (Tiwari & Kumar, 2015). These value drivers are at times generic but can be industry or firm specific. Financial performance measures such as revenues, Earnings per share (EPS), price earnings ratio (P/E ratio), Earnings yield (E/Y), Book-to-market value per share are at times the most important value drivers because they provide strong indicators for the firm and can be used to gain valuable insights into the financial performance of a business (Panigrahi et al., 2014). It is worth noting that financial performance is not limited to profitability, other metrics such as expected future cash flows can be used to access the financial strength of a business. Fundamental analysis using value drivers derived from empirical methodologies has shown to be a useful tool for predicting a stock's future prospects (Segal, 2021). This is because fundamental analysis in the context of value drivers aims to discover the underlying variables that influence a particular security and predicts what buy/sell orders should be placed (Segal, 2021). In so doing, the analysis can be used to evaluate the aspects that affects the value of the security. In applying the concept of fundamentals, the intrinsic value, earnings, book values, price earnings ratios and fair values concepts are important considerations for analysis the prospect of a stock (Doblas et al., 2020). From an investor’s perspective, intrinsic values are the cash flows that can be taken out of the company and be returned to the investor during the holding period of the stocks (Bhattacharyya, 2013).

Intrinsic values are significant and important for cash flow generating assets since they are a function of the magnitude of predicted cash flows (Subramanyam & Venkatachalam, 2001). Earnings events are important to investors for several reasons and have significant impact on the price of a stock where it can result in price volatility (Sharma & Chander, 2009). Public companies are required to publish their earnings reports atleast once a year in other for investors and prospective investors to evaluate the performance of the firm. Although no single metric can tell the whole financial story, positive earnings announcement is very important as it shows how profitable the business has been. Most often, the actual earnings are benchmarked against the expected where earnings above the expected signals a strong firm and vice versa (Schrand & Walther, 2000). The market tends to absorb this information and the stock price jumps in the direction of earnings expectation (Fama, 1970). Fair values are more of a financial reporting concept where it represents the price that will be received if an asset is sold in the market (Chen, 2021) and assumes that the market participants are knowledgeable, independent and willing to enter into a transaction. There are basically three ways of determining the fair value of an asset which are the income approach, market approach and cost approach (Merriman, 2017). The market approach is considered important for the purpose of this study. Fundamental analysts are more interest in securities that have a market price below the intrinsic value and will seek the stock when the price exceeds the intrinsic value (Figurska & Wisniewski, 2016). Therefore, this study applied multiple regression to fundamental analysis to determine stocks that are overvalued and undervalued in the banking and retail industry.

Purpose of Study

The main aim of this study is to use fundamental analysis to generate a value that an investor can weigh against the current price of the security with the goal of outlining the type of position to take that security whether it is under-priced therefore a buy or overpriced which is a sell.


Considering the purpose of this study, the hypothesis to be investigated are:

H0: All the stocks in the banking, industrial, consumer goods, health care and Tech sectors are undervalued therefore a “Buy” signal.

H1: All the stocks in the banking, industrial, consumer goods, health care and Tech sectors are overvalued and therefore a “Sell” signal.

H2: Majority of the stocks in the banking, industrial, consumer goods, health care and Tech sectors are undervalued.

H3: Fewer stocks in the banking, industrial, consumer goods, health care and Tech sectors are undervalued.


Theoretical Concept

Asset pricing is the basic foundation of financial theories (Tallman, 1989). These theories are used to determine how much an investor is willing to pay for a stock. Theoretically, rationale investors are willing to pay the present value of future cash flows of a stock, all things remaining constant, investors will pay more for higher expected earnings and less for lower earnings (Ivanovska et al., 2014). As explained by Fama (1970), efficient markets fully reflect prices where these informational efficiencies stem from competition in profits, low transaction cost and readily available information. If there is information suggesting that the value of an asset will be higher in the future, competitive traders will purchase the asset today increasing its price. The competition to incorporate new information for profits means that prices should change quickly as new information develops. The fundamental index of investing proposes that if prices changes are based on new information and cannot be predictable then trying to predict prices should not be expected to improve the outcome (Malkiel, 2003). The concept of market efficiency proposes that prices are random and active managers should not be successful in beating the market and prices should change quickly based on new information (Fama,1970). Although this prediction attempts to describes real markets and prices do at times changes randomly, active managers do on average trail the market after cost (Investment institute company, 2021). Market efficiency and inefficiency is a very important concept in finance and is at the centre of investment valuation. This is because prices represent the best indication of a firm's value in an efficient market, where the valuation process is not justified. On the other hand, if markets are inefficient, implying that the market price does not reflect the firm's value, the valuation procedure to identify the firm's fair value is warranted. Inefficiencies in the market can be used to screen stocks in order to find undervalued securities (Latif et al., 2011). In essence, in an efficient market, a security’s market price can be used as an impartial estimation of the stock's true value. Market efficiency implies that the probabilities of spotting undervalued assets should not be structured, and that random investment techniques will outperform fundamental analysis (Haqqani et al., 2021). However, there are several evidence contradicting the market efficiency concept where active managers have consistently beat the market south Africa (Heymans & Santana, 2018; Fusthane & Kapingura, 2017). When applied to this study, it can be suggested that the South African market is not efficient and fundamental analysis can be used to provide valuable investment advice. It is also worth noting that fundamental analysis emphasis on the use of financial statement in valuing stocks based on revenues, earnings profit margins and other relevant data.

Review of Prior Literature

With regards to the literature on prior studies, not so much have been published on value drivers from fundamental analysis. More specifically, very few studies were found on this topic meaning very little research has been done around the niche area. The table 1 below presents a summary of the review on prior literature.

Table 1
Summary Of Prior Literature
Study (Author & year of study) Model Period Country Key variables Findings
Akalu (2002) Ordinary least squares 1 January 1994 to 31 December 1999 Netherlands Free cash flow, net sales, operating cost, interest expense on long term debt, income taxes, fixed cost of investment, replacement cost of investment and working capital investment Value drivers display similar trends across industries.
Operating cost and interest expense significantly affects free cash flow.
Eriksson, Forsberg & Gustavsson (2011) multiple regressions 2008 - 2011 United States Free cash flow, Enterprise value to Earnings before interest, tax and depreciation (EV/EBITDA), price earnings ratio EV/EBITDA and price earnings ratio are better measures of stock price return.
Ali (2014) Multiple regression 2001- 2011 United Kingdom and United states Price-to-Earnings, Price-to-Net Income, Price-to-EBITDA, Price-to-Sales, and Price-to-Book. Price to sales and price to book drivers were the most consistent and significant drivers
Wafia et al. (2015) Qualitative review 2015 Italy and United Kingdom Discounted Dividend Model, Discounted Cash Flow Model and Residual Income Model The Residual Income Model is a better predictor of stock value.
Muhammad & Ali (2018) Common effect model, fixed effect model, and random effect model 2007 to 2017 Pakistan Profitability ratios, liquidity ratios, leverage ratios,
and market-based ratios
Fundamental analysis can be used to predict the direction of trade and a security returns.
Daniswara & Daryanto (2019) Regression analysis 2014 - 2018 Indonesia Stock Exchange Earning Yield, Price Book Value, Return On Asset, and Return On Investment. Earning Yield , Price Book Value, Return on Asset and Market Return has affecting stock return

From the above literature there is still a paucity of research that needs to be conducted on value drivers from fundamental analysis. None of the studies above highlights the main drivers of stock return and a propose buy/sell order from the fundamental analysis. Hence, this study fills in the gap in literature. Also, similar studies can be conducted in other markets using the same methodology.


A purposive sampling was used to select 58 firms in the banking, industrial, consumer goods, healthcare and Tech sector. More specifically, 10 firms from the banking sector, 14 from the industrial sector, 14 from the consumer goods sector, 9 from the healthcare and 11 from the tech sector respectively. The selection was based on the market capitalisation from the largest to the smallest. Large market capitalization stocks tend to pay consistent dividends and are less hazardous due to lesser volatility, resulting in adequate analytical coverage (Horton, 2021). The values for all the variables where retrieved on 23/December/ 2021 from yahoo finance providing an up to date market values. In line with the study of this study also used P/E, EPS, E/Y and book-market-ratio to estimate the coefficients of the independent variable in order to estimate the fair value. The values of P/E ratio, EPS where retrieved directly from yahoo finance while the E/Y, book value and book-to-market value per share where calculate based on the following formulas (Daniswara & Daryanto, 2019).

These valuation multiples where applied to determine whether the stock is undervalued or overvalued where a multiple regression analysis was used in the valuation process. The choice of using a multiple regression was because fundamentals such as price-to-book and P/E ratios multiples can be used to value one stock at a time and cannot be applied to stocks with negative EPS or negative book values which make this approach more relevant. The model specification is highlighted below

Firstly, the coefficient for the independent variables where determined which were used to calculate the value factors. The value factors are the weighted average of the coefficients and the values of the independent values. The value factors where then multiples by the stock price to determine the fair values. The results and discussion is presented below Table 2.

Data Results and Analysis

The coefficients of P/E, E/Y and Book-to-market ratio are all positive as expected except in the ba

Table 2
Fundamental Results For The Banking Sector
  Value Factor Fair value Signal Stock price EPS P/E ratio Book value per share
Standard bank 100% 13273.1 Buy 13229 12.54 1062.46 135.14
Firstrand 96% 5693.0 Sell 5918 4.77 1245.12 29.92
ABSA 115% 92599.8 Buy 80600 17.94 4528.68 186.67
Nedbank 100% 979.2 Buy 979 10.14 96.51 3026.75
Investec 109% 9037.6 Buy 8302 8.56 973.37 5.49
Capitec bank 91% 179533.8 Sell 196716 66.93 2965.32 258.72
Sanlam ltd 98% 5616.9 Sell 5737 4.81 1210.97 37.46
Discovery limited 92% 12611.0 Sell 13781 4.75 2924.48 70.67
Rand merchant 90% 3960.4 Sell 4407 1.88 2337.4 18.97
old mutual 103% 1291.8 Buy 1250 0.79 1580.6 14.72

nking sector where the book-market-ratio is negative Tables 2 to 16. Although, most of the p-values of these variables are not significant at 5% with the exception of the banking sector, the announcement of these positive value drivers such as P/E, EPS and book-market-value per share positively affect stock prices. This finding is in line with the findings of (Eriksson et al., 2011; Daniswara & Daryanto, 2019). A value factor of less than 100% indicates that the stock is backed up by a smaller proportion of the fundamental value meaning the stock is overvalued. On the other hand, a value factor of more than 100% means that the stock is undervalued. Therefore, stock highlighted in green are undervalued hence the “Buy” signal and stocks in yellow are overvalued with a “Sell” signal.

Table 3
Fundamental Results For The Banking Sector
  Price Constant Earnings yield (E/Y) Book-to-market value per share P/E ratio
Standard bank 100% 7.55915E-05 0.0009 0.0102 1062.46
Firstrand 100% 0.000168976 0.0008 0.0051 1245.12
ABSA 100% 1.24069E-05 0.0002 0.0023 4528.68
Nedbank 100% 0.00102145 0.0104 3.0917 96.51
Investec 100% 0.000120453 0.0010 0.0007 973.37
Capitec bank 100% 5.08347E-06 0.0003 0.0013 2965.32
Sanlam ltd 100% 0.000174307 0.0008 0.0065 1210.97
Discovery limited 100% 7.25637E-05 0.0003 0.0051 2924.48
Rand merchant 100% 0.000226912 0.0004 0.0043 2337.40
old mutual 100% 0.0008 0.0006 0.0118 1580.60
Table 4
                                     Fundamental Results For The Banking Sector
  P/E ratio Book-to-market value per share E/Y Constant
Coefficients 0.0002 -2.53 825.97 254.37
Standard error 0.0000 0.22 71.49 141.57
R-square 0.9942      
Adjusted R square 0.8246      
t-stat 12.1448 -11.36 11.55 1.80
p-value 0.0000 0.0000 0.0000 0.1225
Table 5
Fundamental Results For The Industrial Sector
  Value Factor Fair Value Signal Stock price EPS P/E ratio Book value per share
Bidvest Group 92.7% 17212.3 Sell 18577 11.31 1648.83 84.7
Textainer group 70.2% 38378.6 Sell 54634 76.59 724.01 25.48
Barloworld limited 98.8% 14719.0 Sell 14896 13.76 1077.55 108.38
Imperial logistics 96.8% 6098.4 Sell 6300 4.89 1292.64 40.63
Super group limited 119.5% 4073.6 Buy 3410 2.84 1201.83 38.17
Kap Industrial 118.3% 496.7 Buy 420 0.38 1096.61 4.12
Reunert limited 102.5% 5284.5 Buy 5156 4.81 1082.33 40.52
Afrimat Limited 77.9% 4457.4 Sell 5725 5.34 1076 16.41
PPC limited 111.3% 578.8 Buy 520 0.55 948.62 4.46
Raubex group limited 101.9% 4055.3 Buy 3980 2.51 1599.04 25.84
Wilson Bayly Holmes 121.4% 13785.8 Buy 11354 5.94 1919.02 105.74
Murray & Roberts 35.4% 504.3 Sell 1425 -0.45 0 12.71
Mix Telematics 81.1% 669.4 Sell 825 0.39 1987.18 0.22
Mpact Limited 99.5% 3312.5 Sell 3330 3.04 1096.48 24.04
Table 6
Fundamental Results For The Industrial Sector
  Price Constant Earnings yield (E/Y) Book-to-market value per share P/E ratio
Bidvest Group 100% 5.38E-05 0.001 0.005 1648.830
Textainer group 100% 1.83E-05 0.001 0.000 724.010
Barloworld limited 100% 6.71E-05 0.001 0.007 1077.550
Imperial logistics 100% 0.000159 0.001 0.006 1292.640
Super group limited 100% 0.000293 0.001 0.011 1201.830
Kap Industrial 100% 0.002381 0.001 0.010 1096.610
Reunert limited 100% 0.000194 0.001 0.008 1082.330
Afrimat Limited 100% 0.000175 0.001 0.003 1076.000
PPC limited 100% 0.001923 0.001 0.009 948.620
Raubex group limited 100% 0.000251 0.001 0.006 1599.040
Wilson Bayly Holmes 100% 8.81E-05 0.001 0.009 1919.020
Murray & Roberts 100% 0.000702 0.000 0.009 0.000
Mix Telematics 100% 0.001212 0.000 0.000 1987.180
Mpact Limited 100% 0.0003 0.001 0.007 1096.480
Table 7
Fundamental Results For The Industrial Sector
  P/E ratio Book-to-market value per share E/Y Constant
Coefficients 0.0003 48.83 326.80 30.73
Standard error 0.0001 18.12 168.62 0.30
R-square 0.9480      
Adjusted R square 0.8324      
t-stat 2.5864 2.69 1.94 0.30
p-value 0.0271 0.02 0.08 0.77
Table 8
Fundamental Results For The Consumer Goods Sector
  Value Factor Fair Value Signal Stock price EPS P/E ratio Book value per share
Anheuser-Busch 78.70% 74464.7 Sell 94600 39.14 2427.43 39.72
British american Tobacco 105.50% 60892.2 Buy 57700 56.33 1030.52 27.44
Compagnie fin Richmont 82.00% 18712.9 Sell 22832 7.46 3092.83 31.61
Distell group 79.80% 13192.1 Sell 16530 8.78 1862.61 61.54
Tiger brands 85.10% 15040.5 Sell 17676 11.3 1576.02 87.48
AVI limited 83.90% 6253.2 Sell 7451 4.97 1488.74 13.33
RCL Foods limited 85.50% 1162.2 Sell 1360 1.12 1217.55 11.15
Astral foods limted 89.40% 15213.3 Sell 17026 12.17 1406 107.15
Oceana Group limited 117.80% 6526 Buy 5540 6.33 877.45 51.22
Metair Investment limited 135.60% 3575.1 Buy 2636 3.72 708.03 21.89
Libstar Holdings limited 127.20% 825.2 Buy 649 0.08 8036.15 9
Sea Harvest group 116.60% 1544.4 Buy 1325 1.66 800.12 9.99
RFG holding 76.00% 895.1 Sell 1177 0.82 1433.62 10.52
Quantum foods holdings 81.70% 436.9 Sell 535 0.53 1009.43 10.29
Table 9
Fundamental Results For The Consumer Goods Sector
  Price Constant Earnings yield (E/Y) Book-to-market value per share P/E ratio
Anheuser-Busch 100% 1.06E-05 0.000 0.000 2427.430
British american Tobacco 100% 1.73E-05 0.001 0.000 1030.520
Compagnie fin Richmont 100% 4.38E-05 0.000 0.001 3092.830
Distell group 100% 6.05E-05 0.001 0.004 1862.610
Tiger brands 100% 5.66E-05 0.001 0.005 1576.020
AVI limited 100% 0.000134 0.001 0.002 1488.740
RCL Foods limited 100% 0.000735 0.001 0.008 1217.550
Astral foods limted 100% 5.87E-05 0.001 0.006 1406.000
Oceana Group limited 100% 0.000181 0.001 0.009 877.450
Metair Investment limited 100% 0.000379 0.001 0.008 708.030
Libstar Holdings limited 100% 0.001541 0.000 0.014 8036.150
Sea Harvest group 100% 0.000755 0.001 0.008 800.120
RFG holding 100% 0.00085 0.001 0.009 1433.620
Quantum foods holdings 100% 0.001869 0.001 0.019 1009.430
Table 10
Fundamental Results For The Consumer Goods Sector
  P/E ratio Book-to-market value per share E/Y Constant
Coefficients 0.000171 2.89 902.30 -163.17
Standard error 0.000032 31.74 145.46 275.33
R-square 0.960501      
Adjusted R square 0.848651      
t-stat 5.346260 0.09 6.20 -0.59
p-value 0.000325 0.93 0.00 0.57
Table 11
Fundamental Results For The Health Care Sector
  Value Factor Fair value Signal stock price EPS P/E ratio Book value per share
Aspen Pharmacare 112% 24683.7 Buy 22016 10.53 2131.17 144.18
Mediclinic international 80% 5142.6 Sell 6449 3.34 1962 4.02
Life healthcare group 102% 2379.4 Buy 2323 1.2 1951.79 13.18
Netcare Limited 136% 2044.7 Buy 1501 0.54 2847.15 7.91
Investec 41% 3432.6 Sell 8302 8.56 973.37 5.49
Adcock Ingram Holdings 75% 3767.9 Sell 5000 3.96 1260.79 28.95
Afrocentric investment corp 94% 475.4 Sell 505 0.51 988.26 5.68
Ascendis health limited 97% 74 Sell 76 -2.27 0 1.07
Advance health limted 102% 45.7 Buy 45 -0.05 0 0.36
Table 12
Fundamental Results For The Health Care Sector
  Price Constant Earnings yield (E/Y) Book-to-market value per share P/E ratio
Aspen Pharmacare 100% 4.54215E-05 0.0005 0.007 2131
Mediclinic international 100% 0.000155063 0.0005 0.001 1962
Life healthcare group 100% 0.000430478 0.0005 0.006 1952
Netcare Limited 100% 0.000666223 0.0004 0.005 2847
Investec 100% 0.000120453 0.0010 0.001 973
Adcock Ingram Holdings 100% 0.0002 0.0008 0.006 1261
Afrocentric investment corp 100% 0.001980198 0.0010 0.011 988
Ascendis health limited 100% 0.013157895 -0.0299 0.014 0
Advance health limted 100% 0.022222222 -0.0011 0.008 0
Table 13
Fundamental Results For The Health Care Sector
  P/E ratio Book-to-market value per share E/Y Constant
Coefficients 0.0004 44.07 1.35 29.92
Standard error 0.0001 33.88 16.93 20.46
R-square 0.9337      
Adjusted R square 0.6939      
t-stat 3.4981 1.30 0.08 1.46
p-value 0.0173 0.25 0.94 0.20
Tables 14
Fundamental Results For The Tech Sector
  Value Factor Fair Value Signal Stock price EPS P/E ratio Book value per share
Prosus N.V 26% 31697.73342 Sell 122346 199.04 624.02 26.71
Naspers limited 25% 59163.53942 Sell 236005 558.08 427.9 97.85
Bytes Technolgy group 110% 595.7918408 Buy 543 9.3 58.53 0.06
Karoooo ltd 102% 53450.14299 Buy 52399 14.61 3619.57 56.16
Datatect ltd 121% 4677.883873 Buy 3871 0.92 4268.19 3.18
Capital appreciation limited 121% 205.8568835 Buy 170 0.13 1287.88 1.11
Alviva holdings limited 74% 1223.639731 Sell 1650 2.59 636.93 21.7
AYO Tech Solutions 124% 494.8696322 Buy 400 -0.6 0 12.99
EOH holdings 8% 46.27371295 Sell 605 -1.66 0 0.85
Adapt IT holding 83% 580.5719073 Sell 700 0.5 1391.65 5.84
Mustek limited 83% 1102.362584 Sell 1336 4.24 312.37 20.56
Tables 15
Fundamental Results For The Tech Sector
  Price Constant Earnings yield (E/Y) Book-to-market value per share P/E ratio
Prosus N.V 100% 8.17E-06 1.63E-03 2.18E-04 624.02
Naspers limited 100% 4.24E-06 2.36E-03 4.15E-04 427.90
Bytes Technolgy group 100% 1.84E-03 1.71E-02 1.10E-04 58.53
Karoooo ltd 100% 1.91E-05 2.79E-04 1.07E-03 3619.57
Datatect ltd 100% 2.58E-04 2.38E-04 8.21E-04 4268.19
Capital appreciation limited 100% 5.88E-03 7.65E-04 6.53E-03 1287.88
Alviva holdings limited 100% 6.06E-04 1.57E-03 1.32E-02 636.93
AYO Tech Solutions 100% 2.50E-03 -1.50E-03 3.25E-02 0.00
EOH holdings 100% 1.65E-03 -2.74E-03 1.40E-03 0.00
Adapt IT holding 100% 1.43E-03 7.14E-04 8.34E-03 1391.65
Mustek limited 100% 7.49E-04 3.17E-03 1.54E-02 312.37
Tables 16
Fundamental Results For The Tech Sector
  P/E ratio Book-to-market value per share E/Y Constant
Coefficients 0.0003 32.44 51.70 104.52
Standard error 0.0001 17.13 32.68 101.48
R-square 0.7960      
Adjusted R-square 0.5657      
t-stat 2.7292 1.89 1.58 1.03
p-value 0.0294 0.10 0.16 0.34


These recommendations are based on the fact that the stocks are justified or not by the fundamental value drivers. It is also worth noting that the R2 and Adjusted R2 indicates that more than 50% of stock price volatility can be explained by the P/E ratio, E/Y and book-to-market ratio. In some cases, the variables accounted for more than 80% of the stock price. With regards to specific sectors the following can be concluded;

1. Banking sector – 50% of the largest 10 banks listed on the JSE are undervalued while 50% are overvalued

2. Industrial sector – Approximately 43% of the largest 14 firms in the industrial sector listed on the JSE are undervalued while 57% are overvalued.

3. Consumer goods sector – Approximately 36% of the largest 14 firms in the consumer goods sector listed on the JSE are undervalued while 64% are overvalued.

4. Healthcare sector – Approximately 44% of the largest 9 firms in the healthcare sector listed on the JSE are undervalued while 56% are overvalued.

5. Tech sector – Approximately 45% of the largest 11 firms in the Tech sector listed on the JSE are undervalued while 55% are overvalued.

From the above analysis, investing in selected firms in the banking and Tech sectors listed in the JSE will provide the optimal returns for investors. This is evident in the 50% and 45% of undervalued stocks in the market. From the above analysis, hypothesis 3 (H3) is accepted and H0, H1 and H2, are all rejected.

Significance of Study

This study empirically applied the concept of fundamental analysis in the different sectors on the JSE to provide insights on which stocks are good investment opportunities in the South African market and also makes inferences on the different sectors highlighted in section 1.1. The study uniquely combines multiple regression and value factor to determine the fair values which is the first study in the South African market as per the authors knowledge. Industry practitioners in other geographical regions can apply the same methodology in other markets.

Limitation of the Study

The main limitation of this study is that it assumes that P/E ratio, E/Y, book-to-market ratio are the only determinants of stock price movements. However, there are other factors that should be considered when investing in equity securities such as governance of the firm, management capabilities and the amount and nature of tangible and intangible assets.


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Received: 03-Feb-2022, Manuscript No. AAFSJ-22-11137; Editor assigned: 05-Feb-2022, PreQC No. AAFSJ-22-11137(PQ); Reviewed: 16-Fab-2022, QC No. AAFSJ-22-11137; Revised: 11-Apr-2022, Manuscript No. AAFSJ-22-11137(R); Published: 18-Apr-2022.

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