Author Topic: How is The Fair Value of a stock calculated  (Read 6876 times)

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Toshi

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How is The Fair Value of a stock calculated
« Reply #-1 on: December 15, 2009, 11:24:07 PM »
Let's share Methods of calculating Fair Values of Stocks,and Fair Values of scrips qouted by various Brokerage Houses.

Pakinvestorsguide

How is The Fair Value of a stock calculated
« Reply #-1 on: December 15, 2009, 11:24:07 PM »

Toshi

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Re: How is The Fair Value of a stock calculated
« on: December 15, 2009, 11:29:58 PM »
Valuation actually means how much is this asset worth.

Valuations can be done in various ways but primarily can be categorized as:

1. Fundamental valuation - the comprehensive and market agnostic valuation
2. Relative valuation - quick way to estimate today's value

1. Fundamental valuation - the comprehensive and market agnostic valuation
Fundamental valuation is driven more by intrinsic valuation making financial projections.Now fundamental vauation doesn't assume anything about whatever mkt is correctly priced. So if fundamentals remain same, assets fundamental value will remain same irrespective of how market is priced.

2. Relative valuation - quick way to estimate today's value
Relative valuation is not getting into financial projections but comparing valuations of assets relative to each other. There is a big assumption underlying this methodology, that market is correctly valuing the assets.
But, if you do a relative valuation, there is a huge difference? Why revisit the assumption underlying relative valuation. If market switches sentiments, all stocks valuation change.So relative valuations changes with times and doesn't imply how much is asset worth. Rather it tells you therelative mispricing that you can exploit to make profits.




Offline traderus

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Re: How is The Fair Value of a stock calculated
« Reply #1 on: August 29, 2010, 12:54:25 AM »
Hi all.
What is Fair Values of Stocks?
Thanks

Offline asimsaim

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Re: How is The Fair Value of a stock calculated
« Reply #2 on: August 30, 2010, 05:04:35 PM »
There are different definitions, but This looks best to me.

" the fair value of an asset is the amount at which that asset could be bought or sold in a current transaction between willing parties, other than in a liquidation. "

so Fair value is only the willingness of parties,

Offline Faiz

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Re: How is The Fair Value of a stock calculated
« Reply #3 on: December 18, 2010, 12:47:12 PM »
Mostly stocks got two type of valuation methods.
1. value using some cash flow / sales / or fundamental earning.
2. Dictated by how much some one is willing  to pay and or how much some one willing to sell, in simple term (demand and supply)

1. About Fundamental Earning or Valuation: It is statistical justification of stock price, The most common example of this methodology is P/E Ration (Price to Earning Ratio). This is normally done for long term stock prices, The person who need to buy certain stock for long term, and value it for dividends, thats the way to go for.

2. About Supply and Demand: Simple, more people want to buy stock, prices will go up, and convesrsely. This for m of valuation is very hard to understand and predict, and often drives the short term stock market.

Offline saifullahkhan7

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Re: How is The Fair Value of a stock calculated
« Reply #4 on: October 12, 2012, 09:43:17 PM »
Target Prices: The Key to Sound Investing
Because they provide additional information that an investor can use to determine if a stock is right for him or her, target prices are better than ratings. This article will discuss what investors need to know about target prices and why they are better than ratings.
Why Target Prices Are Better for Investors Because ratings are generic comments that do not apply to every investor, investors can make
better investment decisions by focusing instead on target prices. Ratings are good sound bites that convey quickly an analyst's point of view, but this is also their fatal flaw. What may be a 'buy' from the analyst's point of view may be a 'sell' to you. Your investment goals and risk tolerance are not the same as the person who wrote the research report. Target prices provide the additional information needed to make good investment decisions.
How to Identify Good Target Prices Target prices are like research reports: there are good ones & bad ones. The bad ones, which are used to deceive investors, are short on factual analysis and long on deceptive assumptions. The good ones provide information that helps investors evaluate the potential risk/reward profile of the stock.
In order to understand the difference between good & bad target prices, we need to define what target prices are and how they should be calculated. A target price is an estimate of a stock's future price based upon an earnings forecast & assumed valuation multiples. A good research report will present its case for a target price by presenting detailed information. A bad research report is not really a report but a deceptive marketing tool that lacks details but contains plenty of overstatements.
4 Keys to Target Price Investors need to evaluate the following four key aspect for determining the legitimacy of a target price: the EPS forecast, the assumptions underlying the EPS forecast, the valuation multiples used and the rationale for using those valuation multiples. Here is how investors can judge these factors.
1. EPS Forecast: This is the foundation of the target price, and the report should contain a detailed earnings forecast model for the time frame covered by the target price  ( preferably two years ) . A quarterly forecast for the next 12 months is useful for tracking the accuracy of the analyst and for keeping an eye on whether or not the company is performing as anticipated.
2. EPS Forecast Assumptions: The report should also discuss the assumptions used to make the forecast so that the reader can evaluate their reasonableness. A report's lack of both a detailed earnings model and list of assumptions should be a warning sign to investors. It is important that the assumptions be reasonable. For example, in the current economic environment it is highly unlikely that a micro-cap company whose sales have grown at a 1-2% pace during the last two years will be able to accelerate sales growth to a double digit pace in the coming two years. A good research report will provide the reasons why the analyst expects a big jump in sales growth  ( for instance, the company may have acquired a new product or patent )  and a detailed earnings model so that thereader can adjust the assumptions  ( e.g. reduce sales growth expectat ions )  to calculate the impact on EPS and valuations.
3. Valuation Multiples Used to Calculate the Target Price: The next building blocks of target prices are valuation multiples, such as P/E, P/B and P/S. You need to make sure that the type of valuation multiples used are applicable to the stock you are researching. For example, the market places more emphasis on P/E multiples for industrial companies and a P/B multiple for banks.
In addition to using the right multiples, the valuation model should be based on more than just one variable. A valuation model based on one multiple is like a one-legged stool: not very sturdy or reliable. While the market may place more emphasis on one multiple over another, a good model consists of at least three variables. Three good multiples for industrial companies are P/E, P/B and P/S. Bank prices, on the other hand, are typically based on P/B and to a lesser extent on P/E and price/total income  ( where total income is defined as net interest income and non-interest income ) .
4. Assumptions Used to Justify the Valuation Multiples Used: Assumptions, whether they are used to support an earnings forecast or valuation target, need to be reasonable. This can be determined by looking at the assumptions and comparing them to historical trends, a relevant peer group  ( i.e. companies, possibly competitors that are in the same business )  and current economic expectations. Don't worry - this is not as hard as it sounds.
In order to make a good case for a target price, the analyst should include a discussion of the historic trends and an analysis of these trends through a comparison to a relevant peer group. If a stock has consistently traded below its peer-group average  ( has been at a discount )  and the forecast expects the multiples to be larger than the peers  ( to be at a premium) , you need to evaluate the reasons why the market is expected suddenly to discover the stock.
While there are occasions when valuations pop  ( such as when a company gets an FDA approval to market a drug) , they are high risk/reward situations and only investors with that typ e of risk tolerance should accept those assumptions and invest in this type of situation. There are situations, however, where a stock is legitimately undervalued because the market is not aware of its fundamentals - the company is literally waiting to be discovered. This is a lower risk situation, but it may take a long time before the market adjusts the stock's valuation.
The Bottom Line Investors will make better decisions if they focus on target prices, which convey more
information for evaluating the potential risk/reward profile of a stock. A good target price is based upon a reasonable set of four factors that provide the reader with information to determine the accuracy of the target price. The absence of any of these four factors should be a red flag that the so-called report could really be a pump and dump marketing ploy.

Source Investopedia
Trust in God! & Candle Sticks, Bollinger Bands and looking into  2 Yrs EPS/DPS helps!!!

Offline SBM

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Re: How is The Fair Value of a stock calculated
« Reply #5 on: November 18, 2012, 12:35:30 AM »
The right role for multiples in valuation

A properly executed multiples analysis can make financial forecasts more accurate.
 


Senior executives know that not all valuation methods are created equal. In our experience, managers dedicated to maximizing shareholder value gravitate toward discounted-cash-flow (DCF) analyses as the most accurate and flexible method for valuing projects, divisions, and companies. Any analysis, however, is only as accurate as the forecasts it relies on. Errors in estimating the key ingredients of corporate value—ingredients such as a company's return on invested capital (ROIC), its growth rate, and its weighted average cost of capital—can lead to mistakes in valuation and, ultimately, to strategic errors.

We believe that a careful analysis comparing a company's multiples with those of other companies can be useful in making such forecasts, and the DCF valuations they inform, more accurate. Properly executed, such an analysis can help a company to stress-test its cash flow forecasts, to understand mismatches between its performance and that of its competitors, and to hold useful discussions about whether it is strategically positioned to create more value than other industry players are. As a company's executives seek to understand why its multiples are higher or lower than those of the competition, a multiples analysis can also generate insights into the key factors creating value in an industry.
Yet multiples are often misunderstood and, even more often, misapplied. Many financial analysts, for example, calculate an industry-average price-to-earnings ratio and multiply it by a company's earnings to establish a "fair" valuation. The use of the industry average, however, overlooks the fact that companies, even in the same industry, can have drastically different expected growth rates, returns on invested capital, and capital structures. Even when companies with identical prospects are compared, the P/E ratio itself is subject to problems, since net income commingles operating and nonoperating items. By contrast, a company can design an accurate multiples analysis that provides valuable insights about itself and its competitors.
When multiples mislead

Every week, research analysts at Credit Suisse First Boston (CSFB) report the stock market performance of US retailers by creating a valuation table of comparable companies (exhibit). To build the weekly valuation summary, CSFB tracks each company's weekend closing price and market capitalization. The table also reports the projections by CSFB's staff for each company's future earnings per share (EPS). To compare valuations across companies, the share price of each of them is divided by its projected EPS to obtain a forward-looking P/E ratio. To derive The Home Depot's forward-looking P/E of 13.3, for instance, you would divide the company's weekend closing price of $33 by its projected 2005 EPS of $2.48.
 

But which companies are truly comparable? For the period covered in the exhibit, Home Depot and its primary competitor, Lowe's, traded at nearly identical multiples. Their P/E ratios differed by only 8 percent, and their enterprise-value-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) ratios1 by only 3 percent. But this similarity doesn't extend to a larger set of hard-lines retailers, whose enterprise multiples vary from 4.4 to 9.9. Why such a wide range? Investors have different expectations about each company's ability to create value going forward, so not every hard-lines retailer is truly comparable. To choose the right companies, you have to match those with similar expectations for growth and ROIC.

A second problem with mutiples is that different ones can suggest conflicting conclusions. Best Buy, for instance, trades at a premium to Circuit City Stores when measured using their respective enterprise-value multiples (6.3 versus 4.4) but at a discount according to their P/E ratios (13.8 versus 22.3). Which is right—the premium or the discount? It turns out that Circuit City's P/E multiple isn't meaningful. In July 2004, the total equity value of this company was approximately $2.7 billion, but it held nearly $1 billion in cash. Since cash generates very little income, its P/E ratio is high; a 2 percent after-tax return on cash translates into a P/E of 50. So the extremely high P/E of cash artificially increases the company's aggregate P/E. When you remove cash from the equity value ($2.7 billion – $1 billion) and divide by earnings less after-tax interest income ($122 – $8), the P/E drops from 22.3 to 14.9.

Finally, different multiples are meaningful in different contexts. Many corporate managers believe that growth alone drives multiples. In reality, growth rates and multiples don't move in lockstep.2 Growth increases the P/E multiple only when combined with healthy returns on invested capital, and both can vary dramatically across companies. Executives and investors must pay attention to growth and to returns on capital or a company might achieve its growth objectives but forfeit the benefits of a higher P/E.
The well-tempered multiple

Four basic principles can help companies apply multiples properly: the use of peers with similar ROIC and growth projections, of forward-looking multiples, and of enterprise-value multiples, as well as the adjustment of enterprise-value multiples for nonoperating items.

1. Use peers with similar prospects for ROIC and growth
Finding the right companies for the comparable set is challenging; indeed, the ability to choose appropriate comparables distinguishes sophisticated veterans from newcomers. Most financial analysts start by examining a company's industry—but industries are often loosely defined. The company might list its competitors in its annual report. An alternative is to use the Standard Industrial Classification codes published by the US government. A slightly better (but proprietary) system is the Global Industry Classification Standard (GICS) recently developed by Morgan Stanley Capital International and Standard & Poor's.
With an initial list of comparables in hand, the real digging begins. You must examine each company on the list and answer some critical questions: why are the multiples different across the peer group? Do certain companies in it have superior products, better access to customers, recurring revenues, or economies of scale? If these strategic advantages translate into superior ROICs and growth rates, the companies that have an edge within an industry will trade at higher multiples. You must become an expert on the operating and financial specifics of each of the companies: what products they sell, how they generate revenue and profits, and how they grow. Not until you have that expertise will a company's multiple appear in the appropriate context with other companies. In the end, you will have a more appropriate peer group, which may be as small as one. In order to evaluate Home Depot, for instance, only Lowe's remains in our final analysis, because both are pure-play companies earning the vast majority of their revenues and profits from just a single business.

2. Use forward-looking multiples
Both the principles of valuation and the empirical evidence lead us to recommend that multiples be based on forecast rather than historical profits.3 If no reliable forecasts are available and you must rely on historical data, make sure to use the latest data possible—for the most recent four quarters, not the most recent fiscal year—and eliminate one-time events.
Empirical evidence shows that forward-looking multiples are more accurate predictors of value. Jing Liu, Doron Nissim, and Jacob Thomas, for example, compared the characteristics and performance of historical and forward industry multiples for a subset of companies trading on the NYSE, the American Stock Exchange, and Nasdaq.4 When they compared individual companies against their industry mean, the dispersion of historical earnings-to-price (E/P) ratios was nearly twice that of one-year forward E/P ratios. The three also found that forward-looking multiples promoted greater accuracy in pricing. They examined the median pricing error for each multiple to measure that accuracy.5 The error was 23 percent for historical multiples and to 18 percent for one-year forecasted earnings. Two-year forecasts cut the median pricing error to 16 percent.
Similarly, when Moonchul Kim and Jay Ritter compared the pricing power of historical and forecast earnings for 142 initial public offerings, they found that the latter had better results.6 When the analysis moved from multiples based on historical earnings to multiples based on one- and two-year forecasts, the average prediction error fell from 55.0 percent, to 43.7 percent, to 28.5 percent, respectively, and the percentage of companies valued within 15 percent of their actual trading multiple increased from 15.4 percent, to 18.9 percent, to 36.4 percent, respectively.

3. Use enterprise-value multiples
Although widely used, P/E multiples have two major flaws. First, they are systematically affected by capital structure. For companies whose unlevered P/E (the ratio they would have if entirely financed by equity) is greater than one over the cost of debt, P/E ratios rise with leverage. Thus, a company with a relatively high all-equity P/E can artificially increase its P/E ratio by swapping debt for equity. Second, the P/E ratio is based on earnings, which include many nonoperating items, such as restructuring charges and write-offs. Since these are often one-time events, multiples based on P/Es can be misleading. In 2002, for instance, what was then called AOL Time Warner wrote off nearly $100 billion in goodwill and other intangibles. Even though the EBITA (earnings before interest, taxes, and amortization) of the company equaled $6.4 billion, it recorded a $98 billion loss. Since earnings were negative, its P/E ratio wasn't meaningful.
One alternative to the P/E ratio is the ratio of enterprise value to EBITA. In general, this ratio is less susceptible to manipulation by changes in capital structure. Since enterprise value includes both debt and equity, and EBITA is the profit available to investors, a change in capital structure will have no systematic effect. Only when such a change lowers the cost of capital will changes lead to a higher multiple. Even so, don't forget that enterprise-value-to-EBITA multiples still depend on ROIC and growth.

4. Adjust the enterprise-value-to-EBITA multiple for nonoperating items
Although the one-time nonoperating items in net income make EBITA superior to earnings for calculating multiples, even enterprise-value-to-EBITA multiples must be adjusted for nonoperating items hidden within enterprise value and EBITA, both of which must be adjusted for these nonoperating items, such as excess cash and operating leases. Failing to do so can generate misleading results. (Despite the common perception that multiples are easy to calculate, calculating them correctly takes time and effort.) Here are the most common adjustments.
Excess cash and other nonoperating assets. Since EBITA excludes interest income from excess cash, the enterprise value shouldn't include excess cash. Nonoperating assets must be evaluated separately.

Operating leases. Companies with significant operating leases have an artificially low enterprise value (because the value of lease-based debt is ignored) and an artificially low EBITA (because rental expenses include interest costs). Although both affect the ratio in the same direction, they are not of the same magnitude. To calculate an enterprise-value multiple, add the value of leased assets to the market value of debt and equity. Add the implied interest expense to EBITA.

Employee stock options. To determine the enterprise value, add the present value of all employee grants currently outstanding. Since the EBITAs of companies that don't expense stock options are artificially high, subtract new employee option grants (as reported in the footnotes of the company's annual report) from EBITA.

Pensions. To determine the enterprise value, add the present value of pension liabilities. To remove the nonoperating gains and losses related to pension plan assets, start with EBITA, add the pension interest expense, deduct the recognized returns on plan assets, and adjust for any accounting changes resulting from changed assumptions (as indicated in the footnotes of the company's annual report).

Other multiples too can be worthwhile, but only in limited situations. Price-to-sales multiples, for example, are of limited use for comparing the valuations of different companies. Like enterprise-value-to-EBITA multiples, they assume that comparable companies have similar growth rates and returns on incremental investments, but they also assume that the companies' existing businesses have similar operating margins. For most industries, this restriction is overly burdensome.

PEG ratios7 are more flexible than traditional ratios by virtue of allowing the expected level of growth to vary across companies. It is therefore easier to extend comparisons across companies in different stages of the life cycle. Yet PEG ratios do have drawbacks that can lead to errors in valuation. First, there is no standard time frame for measuring expected growth; should you, for instance, use one-year, two-year, or long-term growth? Second, these ratios assume a linear relation between multiples and growth, such that no growth implies zero value. Thus, in a typical implementation, companies with low growth rates are undervalued by industry PEG ratios.

For valuing new companies (such as dot-coms in the late 1990s) that have small sales and negative profits, nonfinancial multiples can help, despite the great uncertainty surrounding the potential market size and profitability of these companies or the investments they require. Nonfinancial multiples compare enterprise value to a nonoperating statistic, such as Web site hits, unique visitors, or the number of subscribers. Such multiples, however, should be used only when they lead to better predictions than financial multiples do. If a company can't translate visitors, page views, or subscribers into profits and cash flow, the nonfinancial metric is meaningless, and a multiple based on financial forecasts will provide a superior result. Also, like all multiples, nonfinancial multiples are only relative tools; they merely measure one company's valuation compared with another's. As the experience of the late 1990s showed, an entire sector can become detached from economic fundamentals when investors rely too heavily on relative-valuation methods.

Of the available valuation tools, a discounted-cash-flow analysis delivers the best results. Yet a thoughtful analysis of multiples also merits a place in any valuation tool kit

MARCH 2005
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Offline SBM

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Re: How is The Fair Value of a stock calculated
« Reply #6 on: November 18, 2012, 12:45:14 AM »
All P/Es are not created equal

High price-to-earnings ratios are about more than growth. Understanding the ingredients that go into a strong multiple can help executives make the most of this strategic tool.
 

When it comes to price-to-earnings ratios, most executives understand that a high multiple enhances a company's strategic freedom. Among other benefits, strong multiples can provide more muscle to pursue acquisitions or cut the cost of raising equity capital. Unfortunately, in their efforts to increase their P/E, many executives reflexively try to crank up growth. Too many fail to appreciate the important role that returns on capital play in channeling growth into a high or low multiple.

Simply put, growth rates and multiples don't move in lockstep. For instance, the retailer Williams-Sonoma has a P/E multiple of about 21, based on earnings growth over 15 percent in the past three to five years and low returns on capital.1 By contrast, Coca-Cola has a slightly stronger P/E at 24, despite its lower growth rate.2 Coke's secret? Returns on capital over 45 percent relative to a 9 percent weighted average cost of capital.
It's common sense: growth requires investment, and if the investment doesn't yield an adequate return over the cost of capital, it won't create shareholder value. That means no boost to share price and no increase in the P/E multiple. Executives who do not pay attention to both growth and returns on capital run the risk of achieving their growth objectives but leaving behind the benefits of a higher P/E and, more important, not creating value for shareholders. They may also discover that they have confused their portfolio and investment strategies by treating some high-P/E businesses as attractive growth platforms when they are actually high-returning mature businesses with few growth prospects.3 Better understanding of the way growth and returns on capital combine to shape each business's multiple can produce both better growth and better investment decisions.
 

Doing the math on multiples

The relationship between P/E multiples and growth is basic arithmetic:4 high multiples can result from high returns on capital in average or low-growth businesses just as easily as they can result from high growth. But beware: any amount of growth at low returns on capital will not lead to a high P/E, because such growth does not create shareholder value.
 

To illustrate, consider two companies with identical P/E multiples of 17 but with different mechanisms for creating value. (Exhibit 1). Growth, Inc., is expected to grow at an average annual rate of 13 percent over the next ten years, while generating a 14 percent return on invested capital (ROIC) which is modestly higher than its 10 percent cost of capital. To sustain that level of growth, it must reinvest 93 cents from each dollar of income (Exhibit 2). The relatively high reinvestment rate means that Growth, Inc., turns only a small amount of earnings growth into free cash flow growth. Many companies fit this growth profile, including some that need to reinvest more than 100 percent of their earnings to support their growth rate. In contrast, Returns, Inc., is expected to grow at only 5 percent per year, a rate similar to long-term nominal GDP growth in the United States.5 Unlike Growth, Inc., however, Returns, Inc., invests its capital extremely efficiently. With a return on capital of 35 percent, it needs to reinvest only 14 cents of each dollar to sustain its growth. As its earnings grow, Returns, Inc., methodically turns them into free cash flow.
Because Growth, Inc., and Returns, Inc., take very different routes to the same P/E multiple, it would make sense for a savvy executive to pursue different growth and investment strategies to increase each business's P/E. Obviously, the rare company that can combine high growth with high returns on capital should enjoy extremely high multiples.

The hard part: Disaggregating multiples

Not many executives and analysts work to discern how much of a company's current value can be attributed to expected growth or to returns on capital. Those who try often fail. To see why, consider one widely used model to break down multiples as it might be applied to a large consumer goods manufacturer and a fast-growing retailer with similar P/E ratios (Exhibit 3).
 

The first step is to estimate the value of current earnings in perpetuity, assuming no growth.6 The model then attributes the remaining value to growth. The interpretation from this simple two-part approach would be that the market assumes that the consumer goods manufacturer would have better growth prospects than the retailer.
But this reading misleads because it doesn't take into account returns on capital. Discount retailers fight it out primarily on price, which translates into lower margins and relatively low returns on capital—similar to Growth, Inc. In contrast, consumer goods companies compete in an environment where brand equity can generate higher margins and returns on capital, making them more like Returns, Inc. In fact, the simple two-part model is wrong. The discount retailer is actually expected to grow faster and to create more value from growth than the consumer goods company, whose high valuation would be primarily based on high returns on capital.

An executive relying on the faulty analysis produced by such a simple model might flirt with trouble. The CEO of the consumer-goods company might increase investment or discount prices to drive growth, potentially destroying shareholder value in the long run. By digging a little deeper and appreciating the role of returns on capital, the CEO would more likely focus on protecting high returns and market share.

Accounting for the ROIC premium

The best way to understand the respective roles of returns on capital and growth in shaping a company's P/E is to expand the simple two-part model to draw out a premium for high returns on invested capital.

How can we avoid these misinterpretations and still keep the analysis relatively simple? In our experience, the best way to understand the respective roles of returns on capital and growth in shaping a company's P/E is to expand the simple two-part model and draw out a P/E premium for high returns on invested capital. This approach effectively disaggregates value into three easily understood parts:

Current performance. Current performance is still estimated in the usual manner, as the value of current after-tax operating earnings in perpetuity, assuming no growth. Intuitively, this is the value of simply maintaining the investments the company has already made.

Return premium. This is the value a company delivers by earning superior returns on its growth capital. In order to assess how a company's return on growth capital influences its P/E multiple, we recommend discounting a company's cash flows as if they grew in perpetuity at some normalized rate, such as nominal GDP growth.7 Through repeated analyses, we have found that the result is a good proxy for the premium a company enjoys in the capital markets because of its high returns on future growth capital. In our example, the consumer goods manufacturer would enjoy a large return premium, consistent with its high historical returns on capital.



Value from growth. This value represents how much a company delivers by growing over and above nominal GDP growth. It can be calculated as that portion of the company's current market value that is not captured in current performance or the return premium.8 While more sophisticated and time-consuming analyses are sometimes appropriate, in our experience executives can learn a lot about their P/E multiple with this simple three-part model.

How might an executive change his or her insights about the consumer goods company and the discount retailer using this three-part model? The consumer goods company would be seen to enjoy a large premium for its return on capital. In the consumer goods sector, preserving that return premium must be paramount, but anything the company can do to increase its organic growth rate while preserving its return premium would translate directly into shareholder value and the possibility of a very high multiple.

In contrast, the CEO of the discount retailer would face a tiny premium for return on capital, since his or her company derives most of its value from the rapid growth prospects. Anything this company could do to increase its ROIC, possibly even reining in its growth rate, would add value. By applying the model to calibrate the trade-off between growth and return, the CEO could even determine that a top management priority is to redirect some attention from growth to operations improvement.

MARCH 2004
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Offline abdur rehman

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Re: How is The Fair Value of a stock calculated
« Reply #7 on: June 22, 2014, 12:22:48 AM »
Someone in this forum posted a pdf file of a book that contained a number of formulas to analyize undervalued stocks. I can not find that file anymore. If any one knows, please let me guide me where to find/buy one. The color theme of the book was blue and white. Thanks

Offline hasnain0099

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Re: How is The Fair Value of a stock calculated
« Reply #8 on: August 23, 2014, 08:02:01 PM »
Hi guys em writing a book on solving financial,portfolio and Risk management problems using STATA programing. I am currently writing the equities valuation chapter, I would greatly appreciate your views and suggestions on what content and Models should I consider for Valuation purposes.
Here is the link to the sample so far.
https://www.researchgate.net/publication/262918305_Fundamentals_of_Finance_and_Investment_Management_Using_Stata_%28Final_Sample%29...?ev=prf_pub
Value Plays: ABL,CPPL,FEROZ,HMB,KAPCO,MCB,SPWL.
GrowthPlays: CHCC,ENGRO,MUGHAL,HASCOL,HINOON,SEARL,SPEL,EFOODS.
Yield Plays: ABL,SPWL,EPQL.

Offline SBM

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Re: How is The Fair Value of a stock calculated
« Reply #9 on: August 28, 2014, 06:22:58 AM »
Hi guys em writing a book on solving financial,portfolio and Risk management problems using STATA programing. I am currently writing the equities valuation chapter, I would greatly appreciate your views and suggestions on what content and Models should I consider for Valuation purposes.
Here is the link to the sample so far.
https://www.researchgate.net/publication/262918305_Fundamentals_of_Finance_and_Investment_Management_Using_Stata_%28Final_Sample%29...?ev=prf_pub

nice.
thanks for sharing.
I hate waking up.

Offline SimonKatich

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Re: How is The Fair Value of a stock calculated
« Reply #10 on: December 04, 2015, 10:21:09 PM »
Mujhe ya chezo ka itna idea nahi ha kiu k mai mainly Forex trading pay focus karta hoon aur is mai sab kuch simple aur straight forward ha. Mai abhe OctaFX broker k sath learn kar rah hon khas tor pay in k latest educational guide jo boht hi interesting hain aur inhe follow karne se hum kafi cheze sikh sakte hain jo boht helpful ha profit earn karne k lia aur in ki support service bhe 24/5 active ha.

Offline JavedAkhtar

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Re: How is The Fair Value of a stock calculated
« Reply #11 on: October 02, 2016, 11:09:00 PM »
Katich, mai bhe OctaFX broker k sath kam kar rah hon aur mai ap ki boht se puri tara se semat hoon k ya boht hi ala tareen broker ha jis pay hum har tarike se barosa kar sakte hain aur sab se maze ki baat jo ha woh ha in ki facilities jo aur zada madad karti hain khas tor pay 50% bonus deposit pay jis ko istemal bhe keya ja sakta ha aur is k ilawa yahan aur bhe kahin faide milte hain.

Offline SameerKhan

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Re: How is The Fair Value of a stock calculated
« Reply #12 on: January 26, 2017, 05:31:00 PM »
Ya cheze calculated karna aur samajhna boht muskil hojata ha is lia boht zada behtar ha k hum is k lia proper tools istemal karein aur mai boht lucky hoon k Alpari jese broker k sath kam karta hoon kiu k yahan sirf security nahi milti balke facilities bhe milti hain jis se trading karne mai boht zada asani hojati ha aur sab se achi baat ha k yahan har cheez majod ha jis mai tradaron ka videshee mudra kailakyooletar tak majood ha to hum ya cheze achi tara se calculate kar sakte hain.

Offline Rizwan khan

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Re: How is The Fair Value of a stock calculated
« Reply #13 on: September 08, 2017, 03:38:23 AM »
Stock mai trade karne kafi risky aur complicated ha. Is hi lia mai yahi samajhta hoon k hume aisa kam kanra chaiya jis mai risk kam ho aur gain karne ka zada chance ho. Is lia mai Forex trading karta hoon aur FreshForex k zariya kafi asani hoti ha kiu k yahan banda bina investment k bhe kam kar sakta ha in k $200 Welcome Bonus k zariya!

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