What is the intrinsic value? It is the inherent value of an asset (business, enterprise, etc.). The essential nature of the asset gives it its intrinsic value. The value is not dependent on external circumstances. We can also understand intrinsic value as a true value of an asset. From an investment point of view, it…
The discount rate is nothing but our minimum expected rate of return from an investment. The concept of discount rate is used to calculate the present value of future cash flows originating from an investment. Why do we need to calculate the present value? It is a method to check if an investment is worth…
Given a chance, an informed investor would not buy-sell stocks blindly. They would do stock analysis before investing. But only a few people do it. Why? Because of the lack of suitable tools. So what is the solution? We can analyze stocks in Excel. Please Check: Stock Screener Derived From Stock Analysis Worksheet. Generally, when…
In this method, we first estimate the ‘absolute PE’ of a stock. Then multiply the calculated PE with EPS. This will give us the fair price or intrinsic value of the stock. We will read about this in more detail. What is the PE formula? Conventional PE = Market Price / EPS. The same formula we…
If you like to estimate intrinsic value of a stock, then start with Net Current Asset Value Per Share (NCAVPS). Why? Because it is the easiest to calculate and is most reliable of all. Yes, for me it is even more reliable than DCF method. But the big problem with NCAVPS method is that, its…
[This article comes in a series of articles written about the fundamental analysis]. People who are interested in long term investing in stocks knows about financial ratio analysis. If you have heard about terms like price to earning ratio, price to book value ratio etc, you know ratios. But in this financial ratio analysis we…
Residual income method is a unique and a comparatively easier way to estimate intrinsic value of companies. What makes it unique is the factor called “residual income“. I’m a big fan of valuing companies using discounted cash flow method (DCF). Why? Because if done accurately, its computed intrinsic value can be very accurate. But its…
‘Authorised Share Capital’ and ‘Paid Up Share Capital’ are two terms that we as investors must know about. Why? Because changes in the numbers of these metrics can effect our investment returns (read here). Company needs capital to establish its assets and run its operations. From where the company will source its capital? It can…
PEG ratio is a useful valuation metric for stock investors. Potential investors can use it to gauge if a stock is overvalued or undervalued. PEG is a ratio which establishes a correlation between company’s price valuation with its future growth prospects (see here). We are more conversant with the use of P/E ratio (Price to Earnings…
Generally speaking, good news about a company can take its stock price up, and bad news can take the price down. In real world, lots of news keeps floating about companies. Some news are good and some may be bad. Hence the struggle of price moving up or down is happening every second. But what…
Predicting if a stock will go up or down involves checking rising profits (EPS), sales, and big investors’ actions. We can also comparing its P/E ratio to the industry. A lower P/E with growing profits, like for HDFC Bank, suggests a potential rise. Use this stock prediction tool (online).
Bank Stock Fundamental Analysis Tool Table of Contents Introduction Banking Business – Providing Lockers – Provide Saving Benefits Banks: Growth & Limitations Financial Ratios for Banks – #1. ADR and Its Growth – #2. Equity Multiplier (EM) #3. Return on Asset (ROA) #4. Return on Equity (ROE) Five Steps to Analyze Bank Stocks Conclusion Introduction…
