how do you do your fundamental analysis and get fair value?

how do you do your fundamental analysis and get fair value?

for Company Analysis, i would look at the ratios because they are the easiest to tabulate

- net Profit Margin.
- P/E Ratio.
- Book Value Per Share.
- Current Ratio.
- Debt Ratio.
- Inventory Turnover.

i understand there are other stuff like Economic Analysis and Industry Analysis

some questions :
- how do i look at these ratios and deduce that this stock is worth $1 and not $1.5?
- how often do companies report these ratios? quaterly or annually?
- would it be good to tabulate companies of the same industry and compare their to see who give the best sets of ratios. but what is "best set of ratio", how to compare?
- is there any program to tabulate these automatically and nicely




also, whats your take on http://www.sharesguru.com/valuationT...gviFormula.htm ?


experts here pls teach a newbie like me :wink:

Hello,

just a quick answer here, which you may find usefull:

Try this.

Hi Hanhao,

The model u quoted from shares guru is one of the several hundred valuation models available today. What I understand is that u r mixing two different approaches of evaluating a company's stock. RATIO ANALYSIS and COMPANY VALUATION are basically two different things.

When u do ratio analysis, u calculate several different ratios from a company's financial statements. These can be either calculated quarterly or annually. After that, u either compare these with similar companies in the same industries or with industry benchmarks. There is no standard industry benchmarks available, so u'll probable have to estimate them too using averages from major companies in a particular industry. Ratio analysis is useful in evaluating a company's profitability, liquidity, leverage and other factors. This approach does not directly help in equity investing, but it gives an idea of a company's financial performance and may help to filter good companies for further analysis.

Company Valuation deals with calculating the intrinsic value of a company based on its fundamentals. There are several approaches to this, like Dividend Valuation, Free Cashflow Valuation, Price Multiples Valuation, Residual Income Valuation, etc. In some methods (like Dividend and Cashflow Valuation) u predict the future inflows from a company (using several financial analysis techniques) and discount them back to today (i.e calculate today's value of these future cashflows). That TODAY's value or PRESENT VALUE is basically the intrinsic value of a company. If it is greater than the market value, then the company's stock is under-priced a BUY is recommended. The opposite applies to SELL.

This is a short summary company valuation and ratio analysis. Hope this helps.

Happy Tradin'.

Hi Forexian,

may I ask, which valuation model do you use when evaluating the "fair value" for a stock?

I usually use the built-in evaluation models in AAII Stock Investor Pro, or I use the web site I provided in my previous post.

Hi Hanhao,

For FA I find that "The Zulu Principle" by Jim Slater was one of the easiest of books to read, understand one that just about explains it all. I use it in all my purchases of portfolio shares

The book shows how to search for undervalued growth shares, not undervalued shares on an asset basis. Well worth the price.

When you have read it I'd be pleased and grateful for a chat abut it, just ask for Split any old time.

Split

Hi guys.

Since July last year, the S&P 500 has rose roughly 30%. This is an average per stock. One third undervalued? Gained in Nearly 12 months?

Can i ask you 'fundies' a question?

What's caused this, why did the fundamentals change so sudden that it moved itself one third of it's original value, why was it so undervalued, are the big funds and institutions taking the p...?

Thanks in advance for any answers.

the companies that make up the S & P 500 are for the most part multi's and their foreign sales when translated back into $ point in only one direction
It's a trade based on the weakness of the dollar.There are some exceptions of currencies that have not gained in value against the dollar,but generally if you look at the major currencies you should see what I mean.

Hello there.

Yes, i see it. The weak dollar, would you say that is the most important factor? I only ever look at charts, i should put some other studies in really.

Thanks.