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How to value stocks using 4 basic investing elements?
by Valuation Master Class Valuation Master ClassStock evaluation and investment is an integral part of the
investor’s job. A financial analyst who knows how to value stocks more
accurately is invaluable for a company. There are major investment sectors
where an expert analyst plays a crucial role in determining the fate of the
organization.
There are four essential elements of stock investment and
fixed asset valuation that are quite useful for investors. These are used for
breaking down a stock’s value. Let’s discuss them down below:
1.
P/B ratio – The
Price-to-Book ratio requires accurate assessment on the part of the investor
for it is to be considered useful. P/B ratio is nothing but a real assessment
or value of the company in case it is sold today. For most firms, the book
value includes buildings, equipment, properties, bonds and any other real asset
that can be sold. Because these are physical assets whose value fluctuates in
the market so lower the P/B ratio, the better it is for a company.
2.
P/E ratio – The
Price-to-Earnings ratio is a prediction on the part of the investor which
ensures how long a stock that goes up in value will stay there. Without
earnings, the stock will eventually fall back down. The investors predict which
stock will have more progressive earnings before investing into it. Here, the P/E
ratios must only be compared among companies in a similar industry.
3.
PEG ratio – The
price to earnings growth ratio is a fair investment element that divides P/E
ratio of the company by the yearly growth rate of its earnings. Just like the
P/E ratio, the PEG ratio must also be lower in order to remain ideal for the
company. It showcases how much you are paying for the growth. PEG ratio is like
a graph that plots where the company has been. This helps an investor to look
into it & decide whether they would like to continue in the same direction
or not.
4.
Dividend
Yield – The last element for stock valuation is the Dividend
Yield. It shows the payday that you are getting for the money. It is a crucial
factor that helps investors make a wise decision on whether to invest in a
particular company’s stock or not. Because dividend yield varies with the
industry, the investor must have a thorough knowledge before calculating it.
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About Valuation Master Class 
Valuation Master Class
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Created on Nov 19th 2018 06:25. Viewed 425 times.
