How to make sense of valuation of a stock? Few things I encountered are
- PE and its comparison with historical PE of the company. Also with its Peers in the industry.
- Then we have DCF valuation
- Another one is Graham’s formula for calculating IV. Screener is also using this one.
My questions are :
-
How much weight one should give to these approaches and to valuations overall.? Analysing a company have plethora of factor? Lets say IV of a company is less than CMP but PE is higher than historical PE , does it make that stock undervalued or overvalued ? I totally understand that these are parameters to gauge a range of price but how do I make sense of these values when put together?
-
Is there any book or blog which compares different types of valuations? Just finished my first book “Five rule of successful stock investing” ?
-
Since both DCF and Graham’s formula are giving an approximate values , would it be safe to use Graham’s formula always just because its easier to calculate? Ofcourse , I will be using all the other factors (ROE,ROCE, P/B, EV/EBTIDA) along with it.
Thank you in advance.
| Subscribe To Our Free Newsletter |
