I'm exploring the field of investments and would like to know roughly what numbers and estimates have to be looked at for a company that is going to become public soon. For instance, if I buy 10% of the shares as soon as the company goes public, what number does indicate my return after 10 years? Do I have to estimate the share price based on revenues?
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If the company only offers 10% of the shares, are you going to try to buy all those shares that may well cost you a great deal to acquire them all?– JB KingCommented Dec 1, 2015 at 2:45
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Hi JB King, no they are issuing 100% of shares and I'm looking into estimates of hypothecially 10%. I think the max cap is set at 15%.– AlxCommented Dec 1, 2015 at 19:23
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1 Answer
(Value of shares+Dividends received)/(Initial investment) would be the typical formula though this is more of a percentage where 1 would indicate that you broke even, assuming no inflation to be factored.
No, you don't have to estimate the share price based on revenues as I would question how well did anyone estimate what kind of revenues Facebook, Apple, or Google have had and will have.
To estimate the value of shares, I'd likely consider what does my investment strategy use as metrics: Is it discounted cash flow, is it based on earnings, is it something else? There are many ways to determine what a stock "should be worth" that depending on what you want to believe there are more than a few ways one could go.
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How would you try to estimate the value of shares? there are so many drivers for it– AlxCommented Dec 1, 2015 at 19:24