Stock Valuation
Stock valuation is the process of determining the intrinsic or fair value of a company’s stock based on various financial metrics, future earnings prospects, and market conditions.
Example
An analyst values a stock using the P/E ratio and compares it to industry peers to determine if the stock is overvalued or undervalued.
Key points
• Determines the intrinsic value of a stock using various metrics.
• Helps investors assess if a stock is underpriced or overpriced.
• Common methods include P/E ratio, DCF, and P/B ratio.
Quick Answers to Curious Questions
It helps investors determine whether a stock is undervalued or overvalued compared to its market price, guiding buying or selling decisions.
Common methods include the price-to-earnings (P/E) ratio, discounted cash flow (DCF), and price-to-book (P/B) ratio.
Investors use valuation to assess the long-term growth potential and risks of a stock, influencing their portfolio allocation and strategy.
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