Company Valuation: Easily master the intrinsic value of a company

In the field of stock investing, the total market value of a stock is its current market value. Valuation, which is to assess its intrinsic value, thereby determining whether its total market value is overvalued or undervalued, helps us better decide when to buy and when to sell.

Buffett once said: Buy a great company at a reasonable price. The “price” here is the valuation of a company.

To understand the valuation of a company, the most common way is to look at its market earnings, market net rate, and market sales rate.

But if you want a more complete understanding of a company's valuation, you need more information to analyze. At this time, the company valuation function of Fuji cattle comes in handy.

OPEN FUTUAN BULL AND SELECT A STOCK GO TO DETAILS > COMPANY > FINANCE > COMPANY VALUATION

Futubull not only provides the current market share ratio, market share ratio and market share ratio, but also looks at historical averages for almost 3 months, 6 months, 1 year to 2 years and offers a cross-industry, market-wide spread.

The calculation formula is as follows:

1. PE (Market Earnings TTM) = Share Price/Earnings Per Share (Earnings Per Share = Net Profit/Total Shares of Parent Company Shareholders for the Last 12 Months)

2. PB (Net Market Ratio) = Share Price/Net Worth per Share (Net Asset Per Share = Shareholders' Equity/Total Shares)

3. PS (MARKET SALES RATIO) = SHARE PRICE/TOTAL OPERATING INCOME PER SHARE (TOTAL OPERATING INCOME PER SHARE = TOTAL OPERATING INCOME/TOTAL NUMBER OF SHARES OF THE COMPANY IN THE LAST 12 MONTHS)

Model Description:

1. The PE model uses the net profit metric to calculate the valuation of the company, which is more suitable for companies with long-term stable profits;

2. THE PS MODEL USES REVENUE METRICS TO CALCULATE COMPANY VALUATIONS, WHICH IS MORE APPLICABLE TO COMPANIES WITH LARGER REVENUE SCALES BUT LOWER PROFITS OR FASTER REVENUE GROWTH BUT NEGATIVE PROFITS;

3. The PB model uses net asset metrics to calculate company valuations. It is more suitable for companies with heavy assets and unstable profits, and is more used in industries where cyclicality is evident;

4th. The system recommends the PS model by default when none of the above conditions are met;

5. Valuation model recommendations are made by the system based on relevant financial indicators, which are for reference only and do not constitute any investment advice;

Click Stock Compare to add up to 6 stocks for valuation data comparison

How to use these data to assess its valuation level?

1. Compare with the historical valuation level of the company. If the company's current valuation is above valuation levels most of its history, it is likely to be overvalued and vice versa.

2. Contrast with industry averages. The company is an industry leader and may have a valuation higher than the industry average, and if the company's industry position lags behind, it may also be a little cheaper in terms of valuation.

After evaluating its valuation, how should we deploy our investment decisions?

If the market value of the stock you are interested in is significantly below the fair valuation level, then you can consider it as a potential purchase target;

If the stock you hold has risen over a period of time and has exceeded your fair valuation, or if the fundamentals of the stock have deteriorated, leading to a decrease in intrinsic value and below the current market value, then you may also consider selling the overvalued stock.

In addition, valuations can be used as a reference for risk assessments. For example, when the market environment is bad and most stocks fall, especially when highly valued stocks have a greater decline, you might consider reducing your overall stock position for risk reduction.

Of course, valuation is also influenced by many factors, such as business model, profitability, etc. At the same time, in addition to valuation, we also need to consider other integrated factors and conduct more comprehensive analysis and evaluation in order to make good investment decisions.

Special instructions:

1. When earnings per share or net assets per share are negative, the valuation of earnings is also negative and is considered a loss;

2. WHEN CALCULATING INDUSTRY (MARKET) AVERAGES AND INDUSTRY (MARKET) RANKINGS, “COMPANIES AND INDIVIDUALS VALUED AT NEGATIVE NUMBERS” HAS BEEN EXCLUDED.