Stock valuation

An introduction into pricing stocks--note: I think stock valuation is the most dificult thing we do in finance. Predicting the future without acrystal ball is difficult.

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    Introduction to Valuation

    Valuation is the process of determining what something is worth. It is arguably the most important, and most difficult thing we do in finance. This gives an introductory look at valuation from Discounted CashFlow Analysis (DCF) to market multiples (comparables).

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    Stock Valuation: The Essential Guide

    There are several ways to estimate an intrinsic stock valuation. This guide covers several of the primary methods. Companies have an intrinsic value, and that intrinsic value is based on the amount of free cash flow they can provide during their effective lifetime.

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    How To Value A Stock

    You are one lucky guy if, back in 1997, you beat the crowd and bought stock in a new Internet book store called Amazon.com. Back then, if you'd ponied up $1,000 to buy shares in the firm at $2.50 each, your stake would now be worth $31,000.

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    Ratios

    The second major way to price stocks is using ratios.  There are many ratios that are used, but PE and Price to Book (also called Market to book) are most widely used. 

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    Introduction to the Price-to-Earnings Ratio

    Price to Earnings Ration (or P/E ratio). More free lessons at: http://www.khanacademy.org/video?v=cppxO67e6eo

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    What is the price to book ratio? - MoneyWeek Investment Tutorials

    The price-to-book value ratio is calculated by dividing the current share price by its book value (all fixed and current assets minus current and long-term liabilities) per share (book value divided by the total number of shares in issue).

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    Valuation: Entry Page

    This web site is designed to provide supporting material for valuation related topics. I generally categorize material by the three basic approaches to valuation - discounted cash flow valuation, relative valuation and option pricing applications on valuation. You can read an overview of the three approaches to valuation before you begin.

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