How to Value a Stock

Reporter: John Divine

Publication: U.S. News & World Report


Deadline: May 10, 2017 2:00 pm

How does one value a stock to figure out what it should really be worth? While many investors understand the concept of value investing, very few know how to actually value the fair price of the stock, which is the most important part of using the philosophy successfully. I am looking for comments highlighting a few different ways to go about valuation. Some examples are: using common valuation ratios and comparing those to industry peers, seeking a low PEG ratio, the DCF and DDM models, and even the conceptual process practiced by Aswath Damodaran where he talks about determining whether future outcomes are possible, plausible or probable. Since this is an article for the layman, I will try not to get into loads and loads of figures and math, though some will be necessary.

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