Valuing a stock - for many people it is the hardest part of investing. How do you put a specific dollar value on a stock?
Both of us at Equity Mates have found this the most difficult part of learning to invest. So in this episode we break down what we've learnt over the past 3 years of this podcast.
In this episode you will learn:
- The different types of value investors talk about: enterprise value, book value and market value
- The difference between relative valuation and absolute valuation
- Different methods of relative valuation - price-to-earnings, price-to-sales and price-to-book
- The theory about absolute valuation
- Three methods of absolute valuation we won't be discussing (but you're welcome to Google if interested)
- Discount cash flow (DCF) - what it means and what you need to know
- Reverse DCF - a twist on your discount cash flow
- The effect that changing your assumptions can have on your valuation (a.k.a why you need to take the price you get with a grain of salt)
- Roger Montgomery's valuation method in his book Value.Able
Resources Discussed:
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