How To Value Stocks
Valuation is more of an educated guess than an exact science. Valuation
is the assigning of an accurate value, or price, to an individual stock.
Honestly there is no single correct price, in fact the concept of
valuation is theoretical.
Valuation however is an important guide to know what price to pay for a
stock, bond or ETF.
If you overpay for a stock, then you will likely lose money over the
P/E (price to earnings ratio is one way to value a stock), however it is
not the only way.
Many Hedge Funds, Brokerages and large scale investors have developed
complex mathematical equations to try and place accurate values on
As you can see it is not as easy as it looks to accurately value stocks,
to complicate matters, the fair value of a stock will fluctuate over
time. by Kerry Zangora