Introduction to business

finance

Jatinder Kumar
BBA(EVE) #3RD
 Stock valuation
• Definition:
In financial market, stock valuation is the method
of calculating theoretical values of companies and their
stocks. fundamental analysis may be replaced or
augmented by market criteria.
Valuation method

• When valuing a company as a going concern, there are three main

valuation methods used by industry practitioners:
• (1) DCF ANALYSIS
• (2) COMPARABLE COMPANY ANALYSIS
• (3) PRECEDENT TRANSACTIONS.
These are the most common methods of valuation used in
investment banking, equity research, private equity, corporate
development, mergers & acquisitions (M&A), leveraged buyouts
(LBO), and most areas of finance.
Example of stock value:

A stock value is one of that is cheap in relation to such basic measure of

corporate performance as earning, sales, book value and cash flow.
Commonly viewed as value stocks are Citicorp (C) Exxon (XOM)
Calculated stock valuation

Finding value with P/E ratio

The most popular method used to estimate the intrinsic value of a
stock is the price to earning ratio. It is simple to use, and the data is
readily available. The P/E ratio is calculated by dividing the price of the
stock by the total of its 12 trailing earning.
Common stock valuation

Common stock valuation is the process of determining the value of

share of stock in company. The holder of one share outstanding is
actually the owner of one millionth of the company the value of that
share should represent the percentage of the company worths
DCF valuation

DCF is a valuation method that can be used for privately-held

companies . It project a series of future cash flows, EBITDA or earning
and then discount for the time value of money, typically using the
company's own weighted averaged cost of capital (WACC) over a period
of five to 10 years.
Important of stock valuation

The reason for stock valuation is to predict the future price for potential
market prices for the investors to tome there sales of purchase of
investment. The stock valuation fundamental aim to value the intrinsic
value of the stock that the shows the profitability of the business and
its future market value.
THANKS