For questions relating to the valuation of stocks, based on fundamental analysis, market conditions, etc.

learn more… | top users | synonyms

-2
votes
0answers
25 views

What is the logic of Gordon Growth Model in a DCF analysis?

See http://quant.stackexchange.com/questions/14050/logic-behind-gordon-growth-model-in-a-dcf-analysis as this SE does not support LaTeX. Let's say we are valuing a company using the DCF methodology ...
2
votes
2answers
108 views

As an individual investor, does it always make sense to sell a stock that's gone up due to a merger announcement?

Suppose I hold a stock that's recently had a run-up because another company has made a bid to acquire it. It seems like I should almost always sell the stock in this case, because there are only a ...
-2
votes
2answers
52 views

Minor stakes bought at a premium & valuation for target company

I would like to understand why when A buys 10% of B at a 50% premium then every B shares seems to rise by 50%. Isn't it a misleading induction ? (See today's market reaction of ALCLS FP). I have ...
1
vote
1answer
54 views

How can I understand why investors think a particular company should have a high PE ratio?

Say a particular stock has a PE ratio of 30. Given that a standard valuation is closer to 10 or 15 times earnings, a PE ratio of 30 implies that investors foresee a lot of growth. How can I ...
1
vote
4answers
82 views

Problems with Enterprise Value and better valuation techniques

Enterprise Value is often cited as a better measure of valuation than Market Capitalization. The formula for Enterprise Value starts with Market Capitalization and then adds debt and subtracts cash ...
5
votes
9answers
471 views

What gives non-dividend stocks value to purchasers? [duplicate]

This is a question that has bothered me for awhile about the fundmental nature of the stock market as a whole, and no one has given a satisfying explanation. What is root cause of a stock having ...
1
vote
3answers
66 views

How does 83b election work when paying fair market value at time of grant?

After purchasing restricted stock in a company, so that the amount paid for the stock is exactly equal to its fair market value at the time of purchase, can you file an 83b election at that time? If ...
3
votes
3answers
187 views

What is the valuation of a company based on?

What does the valuation of a company mean, exactly? What is it based on and how is its "correct" value calculated? For example, a valuation of $1 million for a company that has had $50k in profits ...
2
votes
1answer
114 views

Why do many British companies offer a scrip dividend option in lieu of cash?

Some stocks like GlaxoSmithKline, HSBC, Tesco, Unilever all offer dividends every quarterly/yearly, with the option of scrip dividend (opting to use the dividend to purchase shares). Why would ...
11
votes
7answers
2k views

Why does the share price tend to fall if a company's profits decrease, yet remain positive?

I often see news reports along the lines of "Company X has posted a profit of $100 million, 20% lower than the previous year." This kind of news frequently causes the company's share price to fall. ...
8
votes
2answers
199 views

Assessing the value of an ETF

I recently read through Graham's The Intelligent Investor and am looking at what index ETFs or Index Mutual Funds it makes sense for me to invest in. As I was considering this I realized that, at ...
4
votes
2answers
131 views

What to consider before buying (exercising) a family member's private company employee stock options, about to expire?

My brother-in-law is leaving a private tech company. He has $100,000 in stock options (fully vested) which he must either purchase, or abandon completely upon his exit. This is not a startup — ...
9
votes
2answers
349 views

Why would a tender offer be less than the market price?

IBM is trading at about $182 at the moment. There is a tender offer from a company to purchase IBM shares at $170. Why would shareholders accept this offer of $170, when they could just sell the ...
-1
votes
1answer
1k views

Calculating a stock's price target

In the book 'Insider Buy Superstocks', he seems to be calculating price targets like this: [last quarter EPS] x 4 x PE = price target Does that look correct? Is he basing PE off the current stock ...
2
votes
1answer
1k views

How do you calculate the P/E ratio by industry?

I would like to know how to calculate the P/E ratio by industry. On this website, it displays the P/E ratio for the current stock, the industry and the sector: FINANCIALS DTV.O ...
0
votes
0answers
164 views

Calculating P/E5 (price to 5 years average earnings) from P/E ratio and 5 year average earnings growth rate

Vanguard only provides the 5 year price to earnings growth rate and single-year P/E ratio for its mutual funds and ETFs. Is it possible to extrapolate the P/E5 (price divided by 5 years of average ...
4
votes
0answers
298 views

Where can I find P/E and CAPE data for different sectors, countries and market capitalizations

I've been searching for high-quality data on CAPEs (cyclically adjusted price to earnings ratios) for different sectors, countries and market capitalizations. Shiller's Irrational Exuberance website ...
0
votes
0answers
84 views

Is this the correct method for calculating discounted cash flow?

When calculating discounted cash flow, is it better to use figures from the last 12 months, where we take the last fiscal year's results, add the most recent stub period of 6 months, and subtract the ...
4
votes
3answers
370 views

Why would analysts recommend buying companies with negative net income?

Can anyone explain why some analysts recommend companies in the biopharmacy sector as a "buy" even though they have high R&D costs and no real profit? I followed three companies and I see the ...
4
votes
3answers
159 views

Benjamin Graham: Minimum Size of the company

In the book "Intelligent Investor", Graham recommends a minimum annual sales figure of 100 Million $ as one of the criteria. How do we adjust this figure for Inflation and a country other than the ...
2
votes
1answer
328 views

Why do PE ratios for small cap stocks tend to be greater than those for large cap stocks?

As a general rule, why is the PE ratio of small cap stocks greater than the PE ratio of large cap stocks? Is it just a coincidence? Or is there a reason?
1
vote
1answer
159 views

Why is Dell currently trading above the buyout price?

Dell is going private at $13.65 per share, so why is it trading at $13.95 per share right now? Does anybody know when the buyout will actually go through? I can't seem to find that information ...
3
votes
1answer
322 views

Can someone explain recent AAMRQ stock price behavior to me?

I'm interested in American Airlines stock (AAMRQ). Recently they announced a merger with US Airways. The resulting company is said to be worth $11B (USD). Tom Horton, the CEO, said that after ...
3
votes
1answer
204 views

What happened to buyers of ABT right before the split?

Abbott Labs (ABT) split into two companies (ABT and ABBV) at the start of the new year. Shareholders of ABT on Dec. 12 received one share of ABBV for each share of ABT they owned on that date. As I ...
10
votes
1answer
6k views

How does a public company issue new shares without diluting the value held by existing shareholders?

When a public company issues new shares, the total number of shares traded in a secondary market goes up. Assuming there is no change in the fundamentals of the company and the profitability, I would ...
1
vote
2answers
172 views

How meaningful is the “stock price” of a stock?

If a visit, for example, stock information for GOOG, I will be given a stock price for every point in time. How meaningful is that stock price? Is it not the actual trades occurring that are ...
2
votes
3answers
137 views

Are there common stock price trends related to employee option plans?

Facebook IPO was May 18th, 2012. I understand that employees are not able to sell their shares until 6 months after the date of IPO (is this correct?). Can we expect the price of Facebook to decrease ...
3
votes
1answer
504 views

What prices are compared to decide a security is over-valued, fairly valued or under-valued?

The Capital Asset Pricing Model (CAPM) for asset i is E(R_i) = R_f + \beta_{i} (E(R_m) - R_f) It can be used for asset pricing We can compare the expected/required rate of return, E(R_i), ...
5
votes
2answers
714 views

Valuation, pricing, and analysis of securities

I was wondering what differences are between valuation and pricing of securities? To me, they seem identical and for identical purposes. If not, what is each of them trying to get from what is ...
13
votes
4answers
2k views

How does one value Facebook stock as a potential investment?

What techniques would you use to valuate Facebook to determine whether its current stock price is inflated, or whether it represents a good investment?
3
votes
3answers
3k views

How to calculate stock price (value) based on given values for equity and debt?

If a company has $80 million in equity and $20 million in debt, this means that total firm value = D + E = $100 million. Am I then right to assume that if there are 1 million shares outstanding, then ...
1
vote
3answers
196 views

Facebook commonly cited to be worth $100bn. Why is this the most commonly cited valuation?

Ever since Facebook announced they'd IPO, a lot of articles cite their estimated valuation to be about $100bn. This isn't something that's in their S-1, is it? Just curious where this number came from ...
3
votes
1answer
254 views

How do NOLs (Net Operating Losses) affect an investment decision?

[A company trading on the NYSE for $1.85/share] just had a conference call... They have... cash equivalents of $2.27/share. They have more than $1/share in NOLs. NOL, I guess, is Net ...
1
vote
1answer
63 views

Accounting for splits in a stock price graph

Many companies will have splits of their stock (either forward or reverse). However, when looking at the before and after prices, a raw analysis of the graph would look like the stock lost half its ...
8
votes
2answers
249 views

Any specific examples of company valuations according to Value Investing philosophy?

I would like to read a specific example of how the value of a company is determined according to the "value investing" philosophy. Warren Buffet can be seen on one of his YouTube videos, describing ...
0
votes
3answers
2k views

Different ways of looking at P/E Ratio vs EPS

Would it be valid to assume that a stock with a low P/E ratio and also very high EPS is, generally speaking, a better purchase than a stock with that same P/E but lower EPS? My reasoning for this is ...
3
votes
1answer
66 views

Do any sites offer historical valuation statistics?

I am new to investing and just learning the basics such as fundamental analysis. One thing I am interested in is retrieving historical figures such as P/E, PEG, EPS, etc. Does anyone know where this ...
2
votes
3answers
619 views

What effect does a company's earnings have on the price of its stock?

I have been trying to figure out the answer to this question this afternoon, and it seems like most people are saying that supply/demand determines the price of a stock. It seems that earnings, which ...
4
votes
3answers
2k views

How to find out the amount of preferred stock of Coca Cola Company?

I am having trouble finding out how many shares of preferred stock of Coca Cola Company are there. Is this information public? How to find the value of preferred stock? Is it the same as the value of ...
1
vote
1answer
511 views

Calculating valuation (DCF vs Gordon)

When calculating a valuation for a business, what are the reasons to use a Discounted Cash Flow model as opposed to the Gordon Model? Is one model more applicable to certain business situations than ...
0
votes
1answer
97 views

How are investment funding valued when invested in a company before it goes public?

Is there are particular method for banks or individuals when their capital is invested in the company before going public? To make it more clear, how was the Facebook Inc. and Goldman Sachs deal ...
20
votes
3answers
1k views

How are startup shares worth more than the total investment funding?

How does Mark Zuckerberg earn his money from Facebook? He is worth $17.5 billion now, but the total funding for Facebook is only $2.4 billion? I don't understand this. Is this the money Facebook ...
0
votes
3answers
185 views

Can a wealthy investor invest in or make a deal with a company before it goes public / IPO?

Can a wealthy investor invest his money in any company before it goes public / IPO? I am referring to a recent Goldman Sachs and Facebook deal worth $450 Million at a valuation of $50 Billion dollars. ...
2
votes
1answer
2k views

Historical P/E ratios of small-cap vs. large-cap stocks?

According to the Wall Street Journal Website, average trailing 12-month P/E ratios on the major large-cap indices are currently (late September, 2011) around 12-14, which is slightly cheap compared to ...
4
votes
2answers
8k views

How do you determine “excess cash” for Enterprise Value calculations from a balance sheet?

The formula for Enterprise Value that I often see is: EV = Total Debt + Market Cap - Cash Often "Cash" is refined further as "Excess Cash" in this formula. My question is how can I determine the ...
3
votes
1answer
202 views

Are stock prices purely (or mostly) only based on human action?

Are stocks directly proportional to supply and demand? If they are, would this mean that stock prices completely depend on HOW the public FEELS/THINKS about the stock instead of what it is actually ...
3
votes
3answers
259 views

What does “profits to the shareholders jumped to 15 cents a share” mean?

I'm reading the news about a company and they state that: "net profits attributable to the shareholders jumped to US $25.6 million, or 15 cents a share". What does it mean in terms of share price? ...
3
votes
5answers
236 views

How would I use Google Finance to find financial data about LinkedIn & its stock?

According to Google Finance here (at time of writing): LinkedIn has a price earning ratio of 2104.71 : 1. It also says it has a market capitalisation of 7.22 billion dollars. Using this question's ...
3
votes
2answers
140 views

How exactly could we rank or value how “rich” a company brand is?

I've just read http://www.bloomberg.com/news/2011-05-09/apple-brand-value-at-153-billion-overtakes-google-for-top-spot.html and it says Apple's brand value is $153.3 billion and Google's is $111.5 ...
72
votes
11answers
9k views

Why would a company care about the price of its own shares in the stock market?

After a company has issues shares, why should it care if the value of the shares go up and down? Since the shares are now being traded among the public, if the value goes up or down, that is strictly ...