What is the present value concept? Suppose a person invested Rs.1.0 crore in a real estate property. It will be a good investment if he gets back his invested amount, with some surplus (see this example). A simple example. Suppose, the investment (Rs.1.0 Crore) was made today. If the person gets back Rs.1.2 Crore after…
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…
People who know about value investing will be familiar with the term called “margin of safety”. Generally, people prefer to apply a rule of thumb when it comes to the margin of safety. A stock trading at two-third of its estimated intrinsic value can be said to be available at a good margin of safety….
[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…
Analysis of stocks that are new in the market is not so simple. What is the problem? The analyst must make some assumptions. For the company which has 10-year records, the assumptions-list is much shorter. Recently I met a friend who enquired me about the recent IPO (in Dec’2020) of Mrs. Bector Food. Someone advised…
Some people might question the utility of my Stock Analysis Worksheet. Why? Because it mostly rates its stocks as overvalued or of a low overall score. Some users find it frustrating and send emails to me about the plight. I can understand this feeling. We want the worksheet to throw a list of names of high-scoring, undervalued stocks….
The cost of capital is the cost that a company must bear for the funds it has raised to do the business. Doing business calls for arranging cashflows both for short and long terms. There are two ways companies can raise money. The first is through equity. This is done by the distribution of ownership among…
The discount rate is nothing but our minimum expected rate of return from an investment. The concept of discount rate is used to calculate the present value of future cash flows originating from an investment. Why do we need to calculate the present value? It is a method to check if an investment is worth…
Given a chance, an informed investor would not buy-sell stocks blindly. They would do stock analysis before investing. But only a few people do it. Why? Because of the lack of suitable tools. So what is the solution? We can analyze stocks in Excel. Please Check: Stock Screener Derived From Stock Analysis Worksheet. Generally, when…
In this method, we first estimate the ‘absolute PE’ of a stock. Then multiply the calculated PE with EPS. This will give us the fair price or intrinsic value of the stock. We will read about this in more detail. What is the PE formula? Conventional PE = Market Price / EPS. The same formula we…
[Note: Subsequent to the Reliance Future-Group deal, the company has been in a legal battle with Amazon. This legal controversy has severely hampered the long-term prospects of Future Group. The below article was written before Amazon intervened and changed the whole scenario.] Reliance retail and future group company entered into a deal on 29 August…
If you like to estimate intrinsic value of a stock, then start with Net Current Asset Value Per Share (NCAVPS). Why? Because it is the easiest to calculate and is most reliable of all. Yes, for me it is even more reliable than DCF method. But the big problem with NCAVPS method is that, its…
