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Intrinsic Value and Stock Valuation
Intrinsic Value and Stock Valuation
Intrinsic Value and Stock Valuation
Net worth also called as "Shareholder Equity", "Stockholder's Equity", "Net Asset Value" or
"Book Value". It essentially means total assets minus total liabilities.
When you buy shares of a company, you are essentially buying a share of the company's
net worth and a share of the company's future cash flows. If the company's net worth and
cash is growing, the value of the company is going up because of which the company's
share price goes up.
The above chart displays the share price and the book value per share. Generally the share
price is above the book value price but during a recession (e.g. 2008) or due to some other
factors, the share price can go below the book value per share. Smart bargain investors buy
shares when the current market price is below the book value i.e. the stock is undervalued
but at the same time you have to ask yourself why the current market price is going below
the book value price. Is it because of some serious fundamental problems with the
company?
Current Market Price : 856.95 Rs. on 05-December-2014
Market Capitalization of ING Vysya Bank Ltd. is ___ Rs. (Sign up for Premium
Service to see the market capitalization.)
Market Capitalization = Share price x No. of shares ( theoretical price at which you can buy
the whole company )
Enterprise Value = Market Capitalization + Short term debt + Leases + Long term Debt +
Preferred Stock - Cash in hand
Current & Historical Price to Earnings Ratio of ING Vysya Bank Ltd.
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The P/E ratio looks at the relationship between the stock price and the company's earnings.
The higher the P/E the more the market is willing to pay for the company's earnings.
By comparing price and earnings per share for a company, one can analyze the Market's
stock valuation of a company and its shares relative to the income the company is actually
generating. It is usually used to compare the P/E ratios of one company to other companies
in the same industry sector. Ideally you should avoid investing in a company which has a PE
Ratio greater than 20.
ING Vysya Bank Ltd. Average PE Ratio : ____ ( Premium membership tells you if current
PE is lower or higher than long term average PE )
PE Ratio Valuation
Price per share = 10 Years Average P/E Ratio x EPS
Since this intrinsic value depends on Earnings per Share which is based on reported
earnings or "accounting profits" which can be manipulated. We take the average EPS of the
last 3 years instead of the current EPS and average P/E ratio for the last 10 years instead of
the last trailing 12 month P/E ratio.
which is then discounted back to present value giving us an intrinsic value per share.
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Note - Graham number is useful for companies which depend more on their tangible assets
(e.g. Manufacturing, Oil & Gas). It is not so useful for companies which depend more on
their intangible assets (e.g. Pharma, IT).
Intrinsic Fair Value Share Price Range for ING Vysya Bank Ltd.
DCF valuation
: ____ Rs.
PE Ratio valuation
: ____ Rs.
: ____ Rs.
Graham Number
: ____ Rs.
Book Value
: 387 Rs.
Fair Value
: ____ Rs.
: ____ Rs.
: 857 Rs.
PEG Ratio
: ____
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models.
Note - Margin of safety is a principle of investing in which an investor purchases stock only
when the market price is significantly below its intrinsic value. This difference allows an
investment to be made with minimal downside risk. The term Margin of Safety was
introduced by Benjamin Graham (Warren Buffett's teacher) in his famous book The
Intelligent Investor
Note - Adjusted PE Ratio is calculated as Current market price / 3 year median EPS.