Posted byKIRAN Uat June 30. 2012
Dear Donald & Team Valuepickr,
First of heartly congratulation & thanks to Donald & Team Valuepickr to start this wonderful initiative to Ideas,Impliment & Learn.
I want to know & clear doubt about the question that are,
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What is Intrinsic Value of Stock ?
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How it is calculated by different methods ??
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Step by step procedure of Calculating it with recent Market example ??
I hope to get new light on Intrinsic Value & Team Valuepickr Experience of it.
Posted byAdministratorat Monday 16:20
Hi Kiran,
Theoretically this is a very important concept in your toolkit. The concept is useful and very fundamental to the way we think about the value of a stock.
PAT Dorsey, in his5 Rules for Successful Investingbook has given a simple explanation of the concept of Intrinsic Value and gives step-by-step instructions for calculation.Intrinsic Value,Discounted Cash Flowsarticles at ValuePickr attempt to capture its essence in brief.
That was the easy part
Applying it practically is very difficultâŚsimply because very few businesses enjoy predictability in cash flows. And to be able to project cash flows 10 years into the future is even more difficult, if not impossible! The assumptions on Growth and the discounting if tweaked even slightlyâŚlead to very different results âŚover 10 years!
It has practical utility in M&A kind of situations. It is pretty useful for the owners/buyers of a businessâŚbecause they are privy to all the business information at their disposalâŚand can develop a much better feel for the predictability of the business and the cash flows.
But for lay investors like us, it has use as a guideline mostly. Its practical use is limited to giving us the valuation range and enable us to check out a few scenarios.
ValuePickrâs experience has been that âŚwhen a stock is cheap, it screams cheapâŚon most valuation parameters. We havenât needed DCF or other complicated valuation spreadsheets, to establish if a stock is cheap
Hereâs some Guruspeakon the practical use of DCF!
Previously KIRAN U wrote:
I want to know & clear doubt about the question that are,
What is Intrinsic Value of Stock ?
How it is calculated by different methods ??