Questions tagged [stock-valuation]

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

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185
votes
13answers
46k 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 ...
157
votes
21answers
57k views

If a stock doesn't pay dividends, then why is the stock worth anything?

I read somewhere that companies are not required to pay dividends to shareholders (this is correct, yes?). If so, then if company A never pays dividends to its shareholders, then what is the point ...
51
votes
4answers
92k 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 ...
41
votes
13answers
28k views

One of my stocks dropped 40% in 2 days, how should I mentally approach this?

Right after the event, I felt shocked and depressed. I've been engaging in stocks for about a year now but I've never encountered such a big jump in such a short time. What I'm planning to do is just ...
37
votes
9answers
46k views

If stock price drops by the amount of dividend paid, what is the use of a dividend

I have heard that some people buy stocks based on how much dividend they pay, because dividend is considered 'income'. But if I buy a stock for 100$ and it pays a $1 dividend, the stock would also ...
31
votes
2answers
10k views

Is my stock gone forever from a reverse split / bought by another company?

I'm a complete novice in regards to investing and had purchased some shares of OXIS from TD Ameritrade back in March of 2015 (NASDAQ). The company (OXIS International) became very devalued and did a "...
24
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8answers
5k views

Why can more jobs mean more inflation and decreased stock prices? What are other links in the chain to watch out for? [closed]

Many news outlets, such as this one (there are many examples), are reporting that the current US stock sell-off is due to a stronger-than-expected jobs report in January and fears of inflation and ...
22
votes
3answers
2k 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 ...
18
votes
5answers
8k views

Why is AT&T's stock price declining, during the days that they announced the acquisition of Time Warner inc.?

Why does the stock price decline when a seemingly promising acquisition is announced & agreed on?
18
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6answers
2k views

How to evaluate stocks? e.g. Whether some stock is cheap or expensive?

What kind of information do you obtain before buying (or selling) a stock? I know the PE ratio is very important, but not the only thing. Are there any rules of thumb to determine whether some stock ...
17
votes
2answers
4k views

Shorting a stock after dividend

Theoretically, the price of a stock should always fall whenever a dividend is paid out to shareholders. Is this true in practice? If it is, I can just short the stock before the dividend is paid and ...
16
votes
5answers
32k views

Historical stock prices: Where to find free / low cost data for offline analysis? [closed]

I am looking for a free way to get a large amount of data on the prices of stocks. I am not a trader or anything like that so it wouldn't be worth it to pay for a service to give me stock prices. I ...
15
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?
14
votes
7answers
19k 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. ...
14
votes
4answers
2k views

Why would I want a diversified portfolio, versus throwing my investments into an index fund?

Index funds are well-known to give the best long-term investment. However, most financial planners recommend having a diversified portfolio, including components such as bonds and foreign markets. I ...
12
votes
8answers
4k views

At which P/E ratio can a stock be considered overvalued?

What's the "highest" P/E ratio that can be considered healthy? Sure, someone can argue that company X has growth potential, but even that is limited. For example: Netflix has currently a P/E ratio of ...
12
votes
4answers
3k views

How to calculate how much a large stock position is really worth?

Let's say, completely hypothetically, that I own 1,000,000 shares in Company X, and their share price is exactly $10.00. Theoretically, this is worth $10 million, but obviously if I wanted to ...
11
votes
1answer
541 views

Why can unissued capital stock exist?

Unissued capital stock allows a company to issue shares at any given time, diluting the ownership of current shareholders. This does not seem logical nor fair. At any given time, shouldn't 100% of the ...
10
votes
2answers
7k views

Is there any reason to buy shares before/after a split?

I understand the basics of stock splits. My question is, all else being equal is there any benefit to buying shares prior to versus subsequent to a split? As a hypothetical, imagine Apple's price ...
9
votes
4answers
2k views

What is market capitalization? [duplicate]

I constantly hear the terms "small cap" and "large cap" while watching the financial channels on TV. What is meant by small/large market cap? How do they relate to a stock valuation?
9
votes
5answers
1k views

Why would a company like Apple be buying back its own shares?

What is the reason that a company like AAPL is buying back its own shares? Does it have too much cash and it doesn't know what to do with it? So it is returning the cash back to investors?
9
votes
4answers
3k views

What does net selling or buying of a stock mean?

What does it mean when some one says that today there was a lot of net selling or buying in a stock. What does it mean because for every selling there is also a buying going on then how can you ...
9
votes
2answers
3k 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 ...
9
votes
2answers
1k 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 ...
8
votes
6answers
32k views

Any difference between buying a few shares of expensive stock or a bunch of cheap stock

I don't have a ton to invest. I have $1,000 to put into a stock and I'm eying 3 of them. One is currently trading at ~$100/share, another at ~$260/share and another at ~$25/share. So I could get ~...
8
votes
2answers
598 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 ...
8
votes
6answers
12k views

When's the best time to sell the stock of a company that is being acquired/sold?

My company is considering selling itself, and the stock has has gone up 50% in value in the last couple weeks. How long should I wait to sell my stock? Should I wait for announcement of offers? Hold ...
8
votes
3answers
2k views

Where can I find S&P 500 P/E ratios? [closed]

Before, I used the price-to-earnings numbers from spreadsheets published on Standard and Poor's website: Current estimates: www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS Historical values: ...
8
votes
3answers
7k views

Why do volatility stocks/ETFs (TVIX, VXX, UVXY) trend down in the long-term?

I've noticed that stocks/ETFs that measure volatility (TVIX, VXX, UVXY, XVZ) are all trending down massively (eg VXX going from $7000/share on 3/09 and on 6/16 it is around $16/share) in the long-term ...
7
votes
3answers
205 views

Why would selling off some stores improve a company's value?

I was watching Mad Money last night and he was discussing Sunoco how they were planning to liquidate some of their retail locations, thereby improving their value. Why is it that removing locations (...
7
votes
3answers
2k views

Where to find out conversion ratio between General Motors bonds and new GM stock?

I bought some General Motors bonds (ETF-traded under "XGM" symbol) when they were at depressed prices, before GM declared bankruptcy. GM is supposed to be having an IPO sometime in November, and ...
7
votes
3answers
760 views

Volatility indicator

Is there an indicator for the volatility of a stock? When I say indicator I mean like P/E ration, book value etc. If yes, where can I find it? I follow yahoo finance by the way.
7
votes
3answers
43k 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 ...
7
votes
1answer
262 views

Why are Bank of America and Citi trading so far below book value?

In 2008, a famously wealthy man bet big on Bear Sterns, citing that it was absurd that it was trading below book value. That man is now only slightly wealthy. The lesson was that you should trust book ...
6
votes
9answers
6k 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 ...
6
votes
2answers
558 views

When is it worth it to buy dividend-bearing stocks?

TLDR: Is it ever worth investing in stocks to make profit off of dividends? I did some research on dividends. It seems like it has a reputation for stable income, irrespective of the market ...
6
votes
5answers
4k views

Why do stocks go up? Is it due to companies performing well, or what else? [duplicate]

I searched for this question but I didn't get any convincing answer. What everyone says is that if a company does well (I assume this means the company has good returns on its projects) then people ...
6
votes
3answers
1k views

Found old paper shares for company that has since merged

My dad recently went through their safe deposit box and found a paper certificate for 4 shares in Northern States Power Company, issued in 1988. In 1998, NSP and New Century Energies of Denver merged ...
6
votes
5answers
651 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 ...
6
votes
1answer
210 views

Can an ETF perform differently than its holdings?

A mutual fund is just a portfolio of stocks (or other assets) and hence the fund performs as well as its holdings [minus various fees]. However, an exchange traded fund (ETF) performs, like a stock, ...
5
votes
3answers
23k 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 ...
5
votes
2answers
971 views

Why buy stock of a company instead of the holding company who has more than 99% of the stocks

I stumbled upon the fact that VW (DE0007664005) owns 99.55% of all shares of Audi (DE0006757008), i.e. only 0.45% of Audi are traded now. Why should someone buy shares of Audi? You buy stock to: Get ...
5
votes
2answers
6k 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 ...
5
votes
3answers
517 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 ...
5
votes
2answers
225 views

Why would a public company not initiate secondary stock offerings more often?

What prevents a company from doing secondary public stock offerings on regular basis? What are the cons of initiating secondary offerings other than the negative impact on stock price (at least in ...
5
votes
2answers
362 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 — ...
5
votes
4answers
5k 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 ...
5
votes
1answer
2k views

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

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 ...
5
votes
1answer
185 views

What are the mechanics of tracking stock?

I'm curious about tracking stock. Take, for example, NASDAQ:DVMT. It's a tracking stock issued by Dell for VMWare (NASDAQ:VMW), which is partly owned by Dell. The idea is that people could invest in ...
4
votes
4answers
2k views

How much of each stock do index funds hold?

An S&P500 index fund will hold each of the 500 stocks that are in the S&P 500. Does it target holding an equal number of shares of each stock? An equal dollar amount? Does this vary based on ...