INTRINSIC

INTRINSIC VALUE OF A STOCK : whenever we come to the world of investing we generally get confused with the psychology and momentum of investing which is commonly known as emotional intelligence, due to the least valuation of emotional intelligence inherited by a person which causes the least value in choosing stocks.

in order to get the correct intrinsic valuation of stock the first and foremost quality, any investor must possess is the knowledge of fundamental analysis followed by emotional intelligence.

the problem arises for a beginner level of the investor when tries to value a stock and gets confused as to where to start with. we hope this article would be helpful for you to generate knowledge within yourself for the basic beginning of valuation of the stock.

Fundamental Analysis: Intrinsic Value Of A Stock

FACE VALUE (FV):

the nominal price of a share is known as its face value. the equity capital (capital generated by the company by owners) of a company is calculated by multiplying the number of shares issued by its face value.

shares issued to the investor at the face value or a price higher (premium) than the face value, or a price lower(discount) than the face value. the face value of a company only changes if and only if a company splits or consolidates( makes stronger) its shares.

in such cases, the face value of the company’s share would reduce (in terms of splits) or increase (in case of consolidation). the face value of the share is important for calculating the dividend payable on a share. when the dividend is mentioned as a percentage, that percentage is recognized by its face value.

let us understand the equity capital, change in face value, and dividend on face value with the help of an example-

EQUITY CAPITAL: in case a company has issued 1 lakh shares with a face value of Rs.10, then the equity capital of the company would be Rs.10lakhs ( 1lakh*10)

CHANGE IN FACE VALUE: if an investor holds 1 share of Rs.10 face value and the company decides to split its one share into five, then the new face value of its share would be Rs.2 and the following investor would hold 5 such shares.

DIVIDEND ON FACE VALUE: if a company has Rs.10 face value and declares 35% of the dividend, it means a dividend of Rs.3.5 per share.

MARKET VALUE (MV):

this is the market price of the share. the market value of the entire equity of a company is termed market capitalization and is calculated as the market price per share multiplied by the total number of outstanding shares.

the market value depends upon many many factors such as the performance of the company, market sentiments and liquidity, and many others.

BOOK VALUE (BV):

the book value of the company is generally the net worth of the company. to calculate the book value per share, the net worth of the company is divided by the number of outstanding shares.

the book value is the estimated amount of money each share would get if the company gets winded up.

MARKET CAPITALIZATION (MARKET CAP)

market cap is the amount of money required to buy the entire company at its current market price. there are different categories of market capital with respect to the indexing of stocks.

the are no specific size -cuts to measure the large-cap, mid-cap, and small-cap – they are calculated with respect to indexing, such as top 50-100 stocks by market capitalization as large-cap, 200-500 stocks by market capitalization are known as mid-cap, and all other remaining stocks are recommended as small caps.

INTRINSIC VALUE OF A STOCK

the intrinsic value of a stock or an asset is measured by -the free cash flow- generated by the asset. warren buffet defines intrinsic value in the best way possible that is ” IT IS THE DISCOUNTED VALUE OF THE CASH THAT CAN BE TAKEN OUT OF A BUSINESS DURING ITS REMAINING LIFE ”

in simple terms, the intrinsic value of a stock is the discount value of its future benefits to the specified investors. investing in stocks is all about estimating and valuing the stock by its intrinsic value and paying the price today with respect to its future variations and statistics.

the process of valuation is not fixed for all shares since different stocks belongs to different industry and have different evaluating terms and conditions, well specifically it depends upon individual investors, based upon the consideration of the stock or how they value the business.

MARKET VALUE VS INTRINSIC VALUE OF STOCK

If the intrinsic value is perceived to be more than the market value, then this junction is considered to be undervalued. if the intrinsic value of a stock is less than the market value then the stock is said to be overvalued.

the basic goal for an investor is to invest in undervalued stock and sell the overvalued one (theoretically). in order to generate these evaluations, an investor must be very disciplined with the statistics and understanding of intrinsic valuation.

ROLE OF BASIC RESEARCH FOR INTRINSIC VALUE OF STOCK

the role of research in finding an intrinsic value of a stock, the analysis process consists of two parts the research analysis and fundamental analysis.

while analysis involves analyzing all the available information to arrive at conclusion, research involves obtaining all necessary information.

for instance, a company’s annual report may be a map of the golden city of a company. however, obtaining thorough insights into the company’s business and profitability involves very detailed scrutiny of annual reports. and often, information in annual reports is not adequate.

given that the annual reports are published once every year, the information contained in an annual report starts becoming dated with the passage of time. Further, several information pertaining to industry conditions or the broader economy may not be covered in depth in the company’s filings.

It is, however very important that the research work of the analyst should not involve collating insider information. Insider information, in this context, refers to any price-sensitive information about a company that is not available to the public at large.

To watch more on the intrinsic value of a stock by famous investor warren buffet please visit here:

https://youtu.be/TmWW7tsCuGQ
https://youtu.be/TmWW7tsCuGQ

Now let us understand the future of stock market so that we can make decisions accordingly.

STOCK MARKET FUTURE ?

When it comes to the ladder of investing in the stock market it verbally depends upon the segments of the market which are driven by emotion ( which is commonly energy in motion ) typical human psychology rating the losses in the market just by not understanding what to do ?

Moving on to the history of stock markets we have to move to the phase where all of these started back in the Amsterdam stock exchange in 1602, the typical Netherlands confronting their starts in moving forward with their innovations and inventions propagating human life to their peak form.

We understood the variation of demand and the rise of capitalism which gave rise to the scientific revolution ( 1500-1600), the first industrial revolution (1700-1800), the enlightenment, and the age of revolutions (1600-1700) then comes the very strategic Napoleonic war (1803-1815) followed by the invention of communism (1848).

That brings us to the 20th century when the stock market was very popular in America( 1900- till date) people started investing and prolonged theory continued and even today although there are rising powers like China, India they are evaluating their innovations at a very high rate even upon the dependency of the stock market and other respective inventions.

But as we consider the dramatics of our country India only 5-10% of the population among 200 cr. is interested in the stock market, the reason being we are never been taught in school or college our in society to think and make a culture of money or be it money consciousness, students and teachers pursuing and teaching in high school, college and higher universities are not been taught to make a flow culture of financial education which makes them dipped into the market and gives a boundary to innovation.

” 95% OF COLLEGE GRADUATES DOESN’T EVEN KNOW WHAT A FINANCIAL STATEMENT IS” ~ ROBERT. T . KIYOSAKI (statement valid for all over the world )

By none of any reason, the stock market will be highly influenced in the future and it has been now due to the rise of capitalism and continuity to innovation, so for an average person I might be seen that the stock market might not last for long but for most of the cases it’s not true, with the emerging new filed variants and its strategy it just provides the proof that it will last for the very long tenure in future.

Momentarily in India, we have two exchanges of the stock market the BSE ( Bombay stock exchange ) and NSE ( Nifty stock exchange ) in BSE there are approximately 6000 companies and on NSE there are 1600 companies listed, in India unlike other stock exchanges one common stock can be listed in NSE and BSE and no fraction of shares can be bought.

understanding the stock market in more deep detail must require more self-study and proper investigation regarding the material of finances.

SOME BOOKS WHICH YOU CAN GO THROUGH TO UNDERSTAND FINANCE AND THE STOCK MARKET:-

  • For a very basic solid foundation of finance please follow ” RICH DAD POOR DAD” – BY ROBERT .T. KIYOSAKI – This book gives you a solid infrastructure of how important financial education is.
  • For more clear knowledge on finance follow ” MONEY MASTER THE GAME ” – TONY ROBBINS- This will give you a complete guide that how a person even with very minimum income can become wealthy with respect to time, in this book author explains all the financial disruptions and contradictions that come to a mind of a normal person, and how to tackle and solve it.
  • If u want to understand more about finance especially the stock market and you can move on to the book of PETER LYNCH -” LEARN TO EARN ” – HERE AUTHOR VERY SIMPLY EXPLAINS ABOUT THE CRITERIA OF STOCK MARKET AND BASICS OF ANALYSIS.
  • TO step into the next gear you can progress with ” ONE UP ON WALL STREET” – BY PETER LYNCH
  • Finally, if you want to move with the greater consultancy of value investing you can follow the ” INTELLIGENT INVESTOR ” – BENJAMIN GRAHAM.

With the complete study of these few books, you will get a clear idea that why we must focus on finance and keep encouraging everyone about financial knowledge.

well if you are confused to invest in the market or want to gather a few bucks setup please visit www.bridgenile.com

57 thoughts on “How to calculate intrinsic value of a stock according to the Billionaires”
  1. […] we all must have gone through this sentence once in our lifetime or will be going through it “the only thing that remains constant is CHANGE.” from there we can identify that anything that is related to its price also has an inheritance of change in its own way, as the word recession means the change in its pricing or more precisely migrating to its intrinsic price or valuation. […]

  2. I have read your article carefully and I agree with you very much. This has provided a great help for my thesis writing, and I will seriously improve it. However, I don’t know much about a certain place. Can you help me?

  3. Great beat ! I would like to apprentice while you amend your web site, how could i subscribe for a blog site? The account helped me a acceptable deal. I had been a little bit acquainted of this your broadcast provided bright clear concept

  4. Great beat ! I would like to apprentice while you amend your web site, how could i subscribe for a blog site? The account helped me a acceptable deal. I had been a little bit acquainted of this your broadcast provided bright clear concept

  5. Nice post. I learn something more challenging on different blogs everyday. It will always be stimulating to learn content material from other writers and practice a little bit something from their store. I抎 favor to make use of some with the content material on my blog whether or not you don抰 mind. Natually I抣l provide you with a link on your internet blog. Thanks for sharing.

  6. Thanks for your post. I would also like to say that the health insurance brokerage also works best for the benefit of the coordinators of the group insurance policies. The health broker is given a listing of benefits desired by somebody or a group coordinator. Exactly what a broker may is seek out individuals and also coordinators that best complement those needs. Then he offers his tips and if all sides agree, the broker formulates legal contract between the 2 parties.

  7. Wonderful goods from you, man. I’ve understand your stuff previous to and you are just too fantastic. I really like what you have acquired here, really like what you are saying and the way in which you say it. You make it enjoyable and you still care for to keep it wise. I can’t wait to read much more from you. This is really a terrific site.

  8. Wonderful blog! I found it while browsing on Yahoo News. Do you have any suggestions on how to get listed in Yahoo News? I’ve been trying for a while but I never seem to get there! Thanks

  9. Hi there, just became aware of your blog thru Google, and found that it’s truly informative. I am gonna watch out for brussels. I’ll appreciate when you proceed this in future. Many people shall be benefited from your writing. Cheers!

  10. I like what you guys are up also. Such intelligent work and reporting! Carry on the superb works guys I have incorporated you guys to my blogroll. I think it will improve the value of my site 🙂

  11. I like this site very much, Its a rattling nice office to read and find information. “Anyone can stop a man’s life, but no one his death a thousand doors open on to it. – Phoenissae” by Lucius Annaeus Seneca.

  12. Sweet blog! I found it while searching on Yahoo News. Do you have any tips on how to get listed in Yahoo News? I’ve been trying for a while but I never seem to get there! Thanks

  13. Howdy very cool blog!! Guy .. Excellent .. Wonderful .. I will bookmark your website and take the feeds also…I am happy to search out so many useful information here within the post, we need develop extra techniques on this regard, thank you for sharing. . . . . .

  14. Very efficiently written post. It will be beneficial to everyone who utilizes it, as well as me. Keep up the good work – for sure i will check out more posts.

  15. Those are yours alright! . We at least need to get these people stealing images to start blogging! They probably just did a image search and grabbed them. They look good though!

  16. I honor this fantastic article! It was an irreplaceable read filled with engrossing story and edifying information. I am so grateful to the author for sharing their remarkable work with us. It was a pleasure to read this magnificent article and I am looking forward to more in the future.

  17. F*ckin’ amazing things here. I am very satisfied to look your post. Thank you a lot and i’m looking forward to contact you. Will you please drop me a mail?

  18. Very well written post. It will be helpful to anyone who usess it, as well as me. Keep doing what you are doing – for sure i will check out more posts.

  19. Очень интересная статья! Я был поражен ее актуальностью и глубиной исследования. Автор сумел объединить различные точки зрения и представить полную картину темы. Браво за такой информативный материал!

  20. A lot of of what you say is supprisingly precise and that makes me ponder why I hadn’t looked at this with this light previously. This particular piece truly did switch the light on for me as far as this topic goes. But there is actually one factor I am not necessarily too cozy with and whilst I try to reconcile that with the core idea of the point, allow me observe what all the rest of your visitors have to say.Very well done.

  21. I have to show some thanks to you just for bailing me out of such a circumstance. As a result of surfing throughout the world-wide-web and getting suggestions which are not productive, I believed my life was done. Existing without the approaches to the problems you’ve fixed by means of your report is a serious case, and ones which could have negatively affected my entire career if I had not come across your website. Your main training and kindness in handling every item was vital. I don’t know what I would have done if I hadn’t come upon such a subject like this. I can also at this moment look forward to my future. Thanks very much for the expert and sensible guide. I won’t be reluctant to recommend your web site to anyone who should receive recommendations on this issue.

  22. According to my observation, after a foreclosures home is marketed at an auction, it is common to the borrower to be able to still have a remaining balance on the personal loan. There are many lenders who seek to have all costs and liens paid back by the up coming buyer. On the other hand, depending on specific programs, restrictions, and state laws and regulations there may be quite a few loans which aren’t easily sorted out through the transfer of lending options. Therefore, the responsibility still remains on the debtor that has got his or her property foreclosed on. Thank you sharing your thinking on this web site.

  23. Hi! I know this is kinda off topic however I’d figured I’d ask. Would you be interested in trading links or maybe guest authoring a blog post or vice-versa? My blog goes over a lot of the same subjects as yours and I feel we could greatly benefit from each other. If you might be interested feel free to send me an email. I look forward to hearing from you! Awesome blog by the way!

  24. Your article gave me a lot of inspiration, I hope you can explain your point of view in more detail, because I have some doubts, thank you.

  25. Your article gave me a lot of inspiration, I hope you can explain your point of view in more detail, because I have some doubts, thank you.

  26. Your article gave me a lot of inspiration, I hope you can explain your point of view in more detail, because I have some doubts, thank you.

  27. I don’t think the title of your article matches the content lol. Just kidding, mainly because I had some doubts after reading the article.

Leave a Reply

Your email address will not be published. Required fields are marked *

HOW TO OUTPACE YOUR COMPETITORS DURING RECESSION FACTORS ON WHCIH CPI DEPENDS TOP 7 TERM INSURANCE PLANS YOU CAN BUY IN 2023 Top 7 HEALTH INSURANCE IN 2023 Economic Survery 2022-2023