First, we make a mindset of learning from what is a valuation to types of valuations, so valuation is most important for the peaking best stocks.important for learning how to become a billionaire and millionaire.so first learn what is share market, How its works, clear your concepts and then go to valuation concept to learn around the market.
So without wasting your time let's start the topic
What is a mean valuation :
The valuation is concept defers the real output from the product and the price of the product. Valuation means the current worth of the company.
According to Warren buffet,
"price is what you pay and value is what you get."
Meaning price is the amount that you pay for buying the item, and another side value is what you got from this. This is not a complicated term we explain you with an example one you go in the local market and buy 1 kg bhendi at 40 rupees per kg some people buy and some people ignore item because of their utility. Some people get more utility and some people not.many times you say that product is costly means the product is overvalued and some product is cheaper means undervalued.
Intrinsic value :
The intrinsic value is the output of the valuation means one you complete your valuation process. The real worth of the particular product. Intrinsic value depends on consumer utility. The company also decides product pricing with the utility method of average person quality.but in the share market there is no bound in price and real worth of the company some times people pay the excess premium and some times less than rel worth in this time investors get an advantage of undervalued stocks and become a milliner.
We discuss some method of valuation (only for equity)
dividend discount model
this method use dividend-paying company valuation with some formulas
Dn = dividend expected for n years
Po = current price of shares
Pn = expected price on n years
r = expected rate of return
The PE ratio approach
The relation between price ratio expected returns and growth.
The adjusted book value approach
direct comparison approach
discounted cash flow
analyzing historical data
determining the continuing value
calculating firm value and interpreting result
net asset value method
Precedent transaction analysis
This valuation method contains super knowledge about the stock market. And it also needs basics and some advanced knowledge about the stock market. Methods conduct the formulas and assumptions of the future. An important notice is that the mindset about the company doing their works in the future as the past.and all methods calculate the value of the company divided their value with the shares of the company. Some time value of the company is not complete your analysis it also needs management analysis.
In the last, we say that the only valuation is not a complete way to analyze the company. We discuss some points below for the complete analysis of the company
A valuation of the company
management of the company
product and business of the company
Growth of the company
market share in the industry of the company
marketing management of the company