TheStockValue - Calculates the true value of a stock, by implementing a Guru's value investing model.
Table Of Content
1. Introduction
2. The advantage of The Stock Value
3. Registration and Activation
4. The financial parameters the model examines
5. Results - The presented information
6. How the stock intrinsic value is calculated
As an investor in the stock market, you must have asked yourself more than once:
"What is the true value of this company and its stock?".
We know that most of the times "Mr.Market" doesn't offer the stocks in their real intrinsic value.
Statistics show that stocks are usualy offered either overvalued or undervalued depended on many parameters. There are different parameters that can influence the stock price, such as economic parameters, psychologic parameters and so on.
TheStockValue offers a quantitative analysis of the company's fundamental financial ratios, and derives whether the company's condition is attractive. In addition, it values what the company's current stock price should be.
The advantage of The Stock Value
Finding the true value of a stock requires a lot of time and efforts. The starting point of getting the required information to evaluate a company's performance is the company's financial reports. Everyone who has ever tried to read & understand those financial reports, knows that is a long process which requires searching for the right details over many pages. This tedious task might take hours, depending on your level of familiarity with those financial reports.
This is where The Stock Value comes to help you. The Stock Value was developed to look at the company's annual financial reports, by using the stock ticker, and dig out those important parameters that help to understand the company's financial condition and estimate what its current stock price should be.
For the stock price valuation part, the Stock Value tool uses Benjamin Graham's famous formula
for finding a stock intrinsic price:
Using this formula, the tool estimates the future stock price, by estimating the future EPS and future PE
The stock intrinsic value is estimated by calculating the present value of the stock future price with the return the model is looking for (i.e. 15%). In addition, since the model is conservative, it adds an additional safety margin on top of the stock intrinsic price.
The final conclusion is presented using a 3 colored gradient bar, which shows where the current market stock price is in relation to the stock margin of safety, and stock intrisic prices.
intrinsica
As a value investor, you probably know how hard it is to find those right companies to invest in.
Let The Stock Value increase the chances that your hard work pays off. To make an informed decision, you need to agree with the fundamental aspects of the company, such as its business model, product line and management team, as well as to examine the company's past financial results, and current market price.. Add The Stock Value to your primary tool box to increase the effectiveness of the quantitative financial portion of your analysis.
The first step in order to see all the company's analyzed information (e.g. summarized Financial Reports, Stock price recommendation and More) is to Register to this service. Its FREE and fast.
Next, go to Analyze a stock, print the company's stock ticker and press on the Activate Stock Valuator button to start analyzing the company's financial reports.(see picture below)
Top
The first quantitative step when examining a company's condition is to check its major financial parameters and ratios, and their behavior over the years (see in the table below).
In order for a company to be in an attractive financial condition, these parameters should meet certain thresholds:
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ROIC (Return on investments capital) |
|
Sale growth rate |
|
EPS (Earning Per Share) growth rate |
|
BVPS (Equity, or Book Value Per Share) growth rate |
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Free Cash Flow growth rate |
10%The Stock Value presents this information in an easy to read way using a tabular presentation.
Once the company meets these criteria, the model may proceed to determine whether the stock price is currently undervalued by the market, and may therefore be a purchase opportunity.
TopThe Stock Value web-site presents the model information and results in an easy to read way, including:.
1. The company general information: Industry, Average Trade volume and its Market Cap
2. Conclusion - A graphical summary of the company's quantitative analysis.
3. Financial Rations Analysis - Summary of the major financial ratios and behavior over the years, taken from the company's annual financial reports
4. Stock Value Analysis - Walks you through a process of finding the intrinsic price of the stock
5. Charts and Other Resources - Useful links to the stock charts and other company's vital information
6. Raw Data - The selected data taken from the company's financial reports
In order to calculate the intrinsic value of a stock, the model uses the following four parameters.
- The current stock earning per share (i.e. current EPS) - Taken from the market
- Expected EPS growth rate for the next ten years - Estimated by The stock value (see below)
- Expected future PE - Estimated by The Stock Value (see below)
- Required return over the years - As required by the model (see below).
As mentioned above, The Stock Value uses Benjamin's Graham formula for calculating a stock intrinsic price:
The tool tries to estimate what the future stock price will be.
In order to achieve that it needs estimates 2 parameters:
1) The Future EPS
2) The Future PE
Estimating the future EPS
The future EPS is calculated by using the following formula:
The Current EPS is taken from the market (item 1 above)
The EPS growth rate is the estimated expected EPS growth rate for the next ten years: This parameter is determined by taking the minimum between the Wall street analysts expectations for the company's future earnings growth rate, and the historical average equity growth rate.
Estimating the future PE
This parameter is set to be the minimum between the historical PEs, and twice the expected future EPS.
Calculating the Future Stock Price
The future stock price is calculated by substituting the estimated future EPS and estimated future PE into the following formula:
Calculating the Intrinsic stock price
Once the model estimates the future stock price, it can calculate the 'correct' price the stock should have today by compounding the future stock price at a rate the model considers to be attractive. In this case, the model requires a 15% return a year over a ten year period.
Using these requirements, the model calculates the intrinsica stock price using the formula:
Calculating The Stock Margin of Safety Price ("You can never be too cautious")
Last but not least, since the model is conservative it takes an additional safety margin of 50 % on top of the required 15% yearly return:
Once the margin of safety price is calculated, one can compare it to the actual current stock price, and decide whether the stock price is Undervalued.
When an undervalued stock is found, the next thing to do is to use different Technical Analysis indicators in order to find the best timing to buy this stock.
So, what are you waiting for ? start using this tool to find those great stocks.
And don't forget to visit our Watch list section, to check the recommended stocks that this powerful tool found.
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