If you have participated in securities investment, the formula for determining stock value is required for investors to understand. Since then, making investment decisions, if the selling price in the market is significantly lower than that valuation, then wait and sell when the price is close to the real value and profit.
What is stock valuation?
Stock valuation means finding the real or intrinsic value of a security. Or roughly understand, we evaluate how much money that stock is worth.
Then, we will proceed to buy the stock if its price is significantly lower than its valuation. For example, we value Vinamilk milk stock (VNM code) worth 200,000 VND, but when we sell on the market 150,000 VND, we buy VNM shares and wait until VNM reaches 200,000 VND, we will sell and enjoy profit.
This is like setting a price for a land or a motorbike. For example, SH car is worth 75 million VND, Wave car is worth 20 million VND. If someone SH sells 40 million, we buy it, and will sell it later; And if someone buys Wave for 40 million, we sell it (if we own the Wave) and we will benefit from that investment.
Real value is the value that must be calculated using stock valuation methods.
The market price is the price that investors buy and sell in the current market through the stock exchanges of HOSE, HNX, UPCOM… All transactions are done online.
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Normally, the real market value will be approximately equal to the market price (called the efficient market), but still a few, 5% -20% will have a real value greater or less than the price market. When:
• Market price> = Actual value: We do not buy and sell stocks
• Field value
Note on stock valuation formula
Before going to the details of stock valuation formulas, investors should pay attention to the following:
There is no single, most accurate formula for valuation of all stocks or companies.
Because: Each type of business, every business cycle, each macro condition, the future orientation, the internal strength of the business, the investors capacity gives a different value. And sometimes there are businesses that just cant price it - stay away!
That is why, a novice investor in fundamental analysis or reading this book is very susceptible to confusion among the great gurus, each of them valuing one style; Along with that is a myriad of philosophical standards for pricing.
Buffett: "Someone who thinks that being able to value all companies is an illusion."
However, we can choose each segment that suits us and set the price. Just as it is impossible to judge a fish by its climbing ability. Pele, Messi, Ronaldo are priced based on their ability to kick the ball, not on the ability to play basketball or tennis.
So when we value it, we cannot just give P / E, P / B, growth rate, ROA, ROE, and discount the cash flow.
If it is so simple, perhaps those who study economics, finance, or mathematics will be the champions; but not really. Many famous value investors come from Medicine and Pharmacy, Philosophy, Chemistry, General or just graduated 12/12 ... are master value investors, I can name a few famous investors in their number.
So stock valuation does not necessarily have to know how to value all stocks, just choose 1 or a few segments to play and you will have fish for life.
For new investors, instead of trying to make money by investing in stocks, invest in yourself.
Stock valuation methods / formulas.
• Valuation of shares according to P / E method.
• Valuation of shares according to P / B method.
• Valuation of shares according to the dividend method, valuation by the method of discounting the dividend stream.
• Valuation of shares by cash flow discount method.
• Stock valuation according to EV / EBIT, & EV / EBITDA method.
• Valuation of shares according to P / S method
• Valuation of shares according to PEG method
• Valuation method according to the Benjamin Graham formula
Equity valuation formula that Peter Lynch & John Neff use - a combination of dividend, growth rate & P / E
Enterprise evaluation methods such as ROE index, ROA index, Debt, Inventory, accounts receivable, products, competitive advantage ...
Unit providing stock price appraisal services
Valuation and stock valuation services are one of the specialized areas of Hoang Quan Appraisal Company Limited. We are always confident with our strengths such as: with many years of experience, abundant information data, a large team of highly qualified appraisal experts, fast, tight, dark appraisal reduce appraisal costs ... Hoang Quan Appraisal Co., Ltd. will provide customers with information about the value of assets with high reliability for each appraisal purpose.
