P/E ratio in its basic form (trailing P/E) may not be as useful. But there can be multiple derivaties of it. P/E ratio seen through the lens of ‘earning yield’ or ‘PEG ratio’ gives good insights into price valuation. I personally love valuing high P/E stocks using the ‘forward P/E’ method.
So, I was just digging into this article about Dixon Technologies, which, wow, has some incredible revenue growth. But what really jumped out at me was the discussion about its massive P/E ratio. It got me thinking – how should a regular investor like us even approach these high-flying, high-P/E stocks? Should we run for the hills,…
I recently received this interesting comment [see Title] by a young investor in her 20s. I thought it will be better to blog about it. Face value, also known as the par value of a share, represents its nominal value as stated in a company’s books. It is the fixed value assigned when a company…
In this article, I’ll try to use the method proposed by Mr. Aswath Damodaran to calculate the Equity Risk Premium of an Index. I’ll use the S&P BSE 500 index for our calculations. We can apply the same method of calculation to the equity risk premium (ERP) of individual stocks. But before proceeding further, allow…
The Price to Free Cash Flow (P/FCF) ratio is a valuation metric that compares a company’s stock price to its free cash flow. By dividing the stock price by the free cash flow per share, the P/FCF ratio provides insight into how much investors are willing to pay for each unit of cash generated by…
Let me tell you a story of the Chaiwala, the Software Engineer, and the Secret of Free Cash Flow. So, a few years ago, I was sipping chai at my regular spot near my office – you know, that tiny little stall run by Sharmaji, who makes the best ginger chai in the area. I overheard a…
This article provides real-world examples and applications of the WACC. It is a critical concept used by companies in investment decision-making. As an investor, you will gain valuable insights on how to use WACC to evaluate investment opportunities and make informed decisions. The Weighted Average Cost of Capital (WACC) is a financial concept. It highlights…
The EV/EBITDA ratio is a financial metric that is commonly used to judge the valuation of a company. It is often used as an alternative to the (P/E) ratio. The EV/EBITDA ratio is considered to be a more comprehensive valuation metric. In this article, we’ll learn more about this ratio. EV/EBITDA Calculator Use this calculator…
The mathematics side of Net Present Value estimation is complicated. Hence, we’ve implemented the whole algorithm in our stock screener. Nevertheless, this article explains my NPV algorithm in full detail.
We’ve built an Excel-based tool that can analyze stocks. But how beginners can calculate the intrinsic value in excel on their own? In this article, I’ll discuss a procedure to do it. It is simple, and even beginners can practice it. There are limitations of estimating intrinsic value using this method. But experts say that using some valuation method is better than investing blindly…
[Updated] Discounted Cash Flow (DCF) method is a better way of intrinsic value calculation. The DCF model is derived from a concept called Net Present Value (NPV). Why Intrinsic Value is required? Because based on it, one can judge if the stock is fairly priced or not. DCF method is not an easy way of doing price…
What is the intrinsic value? It is the inherent value of an asset (business, enterprise, etc.). The essential nature of the asset gives it its intrinsic value. The value is not dependent on external circumstances. We can also understand intrinsic value as a true value of an asset. From an investment point of view, it…
