How to find a stocks real value?
- Thread starter MoneyMaker
- Start date
The formula I know of would be too difficult to try and write in text format and I don't want to take the time to explain it so here is an easier way and it gives you the basic fundamentals for valuation.
http://www.zecco.com/forums/Basic-Lessons-in-Common-Stock-Valua-24850_1.aspx
http://www.zecco.com/forums/Basic-Lessons-in-Common-Stock-Valua-24850_1.aspx
1) Stocks have no real or intrinsic value. They only have make believe value based on what someone is willing to pay.
2) Stock move up and down in price. After you buy the stock your P/L is based on the stock's movement up or down. It is not based on the stock's real value.
3) Your goal is to make as much money as possible and to lose the least possible. The best way to go about this is to a) identify price trends b) enter positions in the direction of the trend c) cut losing positions quickly d) hold on to winning positions.
2) Stock move up and down in price. After you buy the stock your P/L is based on the stock's movement up or down. It is not based on the stock's real value.
3) Your goal is to make as much money as possible and to lose the least possible. The best way to go about this is to a) identify price trends b) enter positions in the direction of the trend c) cut losing positions quickly d) hold on to winning positions.
I wouldnt focus on P/Es or a company's valuation. I would just focus on purely supply, demand and bias:
1) Float (supply of shares)- How many shares are outstanding? I consider stocks with under a 100 million share float as ideal for trading.
2) Growth (fuels demand for shares)- Current Quarterly Earnings/Share Growth - minimum of 40% and quarterly sales accelerating at 40% or better.
3) Chart (bias)- Using only simple trend-lines (no indicators), volume and classic chart-patterns, which direction is the stock trending?
I will give you one good example where the stars were aligned perfectly...FSLR. FSLR had all of the components above.
Walmart used to have all the components, however, as time wore on the stock split a few times and the company sold more shares increasing the float. Lots of insider sells increasing the float. It went from a small speedboat to this massive tanker where its very difficult to turn.
Dont focus on valuation...focus on the true action of price...
1) Float (supply of shares)- How many shares are outstanding? I consider stocks with under a 100 million share float as ideal for trading.
2) Growth (fuels demand for shares)- Current Quarterly Earnings/Share Growth - minimum of 40% and quarterly sales accelerating at 40% or better.
3) Chart (bias)- Using only simple trend-lines (no indicators), volume and classic chart-patterns, which direction is the stock trending?
I will give you one good example where the stars were aligned perfectly...FSLR. FSLR had all of the components above.
Walmart used to have all the components, however, as time wore on the stock split a few times and the company sold more shares increasing the float. Lots of insider sells increasing the float. It went from a small speedboat to this massive tanker where its very difficult to turn.
Dont focus on valuation...focus on the true action of price...
security analysis
common stocks and uncommon profits
read them and learn
common stocks and uncommon profits
read them and learn
one of my professors says that the value of something is the present value of its future cash flows 