Sri Lanka Equity Forum
Dear Reader,

Registration with the Sri Lanka Equity Forum would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
Sri Lanka Equity Forum
Sri Lanka Equity Forum

Discussion Forum for Stock Market Investors in Sri Lanka

සිංහල පරිවර්තනය
Submit Post
Submit Post

Latest topics

» BFN බොරු සෙලින් දාලා කොහොම හරි 11 වගේ ගානට 500000 එකතු කරගන්න කියලා අර 14 ට ලක්ශයක් සෙලින් දැම්මේ මේ ටේලර් මහත්තයාම තමයි
by ddrperera Today at 9:22 am

» whats the purpose of Bomb blasts?
by sanjulanka Today at 9:11 am

» 8 Finance companaies to be closed very soon
by sanjulanka Today at 7:28 am

» Buy When There's Blood in the Streets
by God Father Today at 6:51 am

» Best Free forex signals provider
by Uaecoindubai Yesterday at 3:24 pm

» Chairmam of Sanasa arrested over suspicion of misappropriation of funds
by hammurabi Yesterday at 9:36 am

» Sri Lanka Kattadiyalage Wegapitiya tries to manipulate Household Gas prices in Gas market, Wegapitiya lead LAUGFS Gas in a secret Deal to Bankrupt Government's Litro Gas by affecting 1.3 Million Households and 5 million people in the country
by Uaecoindubai Sat Apr 20, 2019 2:55 pm

» Economic Health of Sri Lanka
by Uaecoindubai Sat Apr 20, 2019 2:30 pm

» What is going on with TFC.N0000
by Uaecoindubai Sat Apr 20, 2019 2:30 pm

» REEF possible run.
by hammurabi Sat Apr 20, 2019 6:50 am

» EAST INTERESTING DAYS AHEAD 25+
by glad Fri Apr 19, 2019 10:40 am

» Weekly Stock Market Roundup
by Insights Equity Fri Apr 19, 2019 8:35 am

» Would CIC make an upward move in the coming weeks?
by hammurabi Fri Apr 19, 2019 12:39 am

» Why AAIC Should trade above RS.50/-
by wisdom79 Thu Apr 18, 2019 8:08 pm

» Daily Stock Market Update
by Insights Equity Thu Apr 18, 2019 6:17 pm

» SME M&A opportunity
by raheem72@gmail.com Thu Apr 18, 2019 1:21 pm

» Sri Lanka Hilton Hotels Must Investigate or Oust Unfit and Improper - Kashmi App Bankrupted Sanjiv Alles who hides about his Career in Kashmi for Colombo Hilton Hotel Director Profile
by AmalHoole Thu Apr 18, 2019 12:47 pm

» Why ALHP is having a huge demand despite consecutive losses?
by wisdom79 Thu Apr 18, 2019 11:03 am

» TIME TO LOOK AEL
by sanjulanka Wed Apr 17, 2019 6:42 pm

» HEXP next run up to 120-130
by nishjaya Wed Apr 17, 2019 12:21 pm

» Cabinet nod for Colombo Stock Exchange to be converted to a company limited by shares
by glad Wed Apr 17, 2019 9:30 am

» Lanka Bell to be acquired by Mobitel - Sources
by soileconomy Wed Apr 17, 2019 7:07 am

» Sri Lanka Watapota (WAPO) Guardian Capital lose Rs. 10 Mn of Funds because of Kashmi App Closed down, Kashmi Co-Founder Bankrupt Sanjiv Alles now landed on Hilton Colombo Director Board owned by Yahapalana Government
by AmalHoole Tue Apr 16, 2019 3:17 pm

» සුභ අලුත් අවුරුද්දක් වේවා.
by sanjulanka Mon Apr 15, 2019 12:38 pm

» I bought PCHH.N and SING.N sometimes back?
by hammurabi Mon Apr 15, 2019 12:14 pm

» Highest temperature hike after 128 years in sri lanka
by nimantha80 Sun Apr 14, 2019 4:47 pm

» DEBTS FREE AAIC MUST MOVE UP,3.36BN FROFIT, MARCH Q 1.00BN
by wisdom79 Sun Apr 14, 2019 8:15 am

» VONE , is it time to sell or holds
by Uaecoindubai Sat Apr 13, 2019 1:27 pm

» HVA WILL THEY RECTIFY THE REGULATORS QUARIES BEFORE DEAD LINE?
by nimantha80 Fri Apr 12, 2019 3:12 pm

» NDB Leasing Centers open at Gampaha, Negombo
by Uaecoindubai Thu Apr 11, 2019 8:17 pm

» I met Karuna Today.
by Uaecoindubai Thu Apr 11, 2019 8:15 pm

» Look APLA its trending to 98LKR
by Uaecoindubai Thu Apr 11, 2019 8:13 pm

» ROYAL CERAMIC (RCL)
by Yahapalanaya Thu Apr 11, 2019 8:11 pm

» Look BPPL company
by Uaecoindubai Thu Apr 11, 2019 10:10 am

» PABC.N0000 ? Will come down to Rs. 11 - 12 level?
by Uaecoindubai Wed Apr 10, 2019 5:13 pm

» Any news on MBSL.N0000
by Uaecoindubai Wed Apr 10, 2019 4:56 pm

» New NDB Privilege Banking and Leasing Centres open in Kurunegala
by Soilconomy Wed Apr 10, 2019 11:30 am

» TIME TO WATCH - LOFC - BFN
by Uaecoindubai Wed Apr 10, 2019 11:20 am

» ශ්‍රිලංකාවේ ණය බරතාවය. Sri Lanka's Debt Trap
by soileconomy Wed Apr 10, 2019 7:28 am

» 2019 revised traffic fines
by Uaecoindubai Tue Apr 09, 2019 12:47 pm

» LLUB Surprise
by hammurabi Mon Apr 08, 2019 9:29 pm

» MARKET CRASH - GUARANTEED
by Uaecoindubai Mon Apr 08, 2019 5:11 pm

» Just 2% of investors control 95.7% of the stock market
by sanjulanka Mon Apr 08, 2019 8:47 am

» Lofc delisting??
by sanjulanka Mon Apr 08, 2019 8:17 am

» watch UBC -LDEV - BALA - LOFC
by karuna2 Mon Apr 08, 2019 7:43 am

» CHECK YOUR SELL ORDERS - BULLS ARE READY
by karuna2 Mon Apr 08, 2019 7:43 am

» REXP***REXP***REXP***REXP
by Uaecoindubai Sun Apr 07, 2019 11:20 pm

» Sena Yaddehige charged with insider dealing by Sri Lanka regulator
by Uaecoindubai Sun Apr 07, 2019 4:36 pm

You are not connected. Please login or register

Sri Lanka Equity Forum » Stock Market Charts & Graphs » The Basics Of Valuing Companies

The Basics Of Valuing Companies

Go down  Message [Page 1 of 1]

1The Basics Of Valuing Companies Empty The Basics Of Valuing Companies on Wed Sep 14, 2011 3:31 pm

sriranga

sriranga
Co-Admin
Valuation is at the heart of all investment decisions.
Every time you choose to buy or sell a share you take a view on what the share is worth, and whether the market's valuation is high, low, or about right.

First we will run through the basic methods, and then have a look at how they can be applied in practice on companies in various sectors.
Valuation methods tend to focus on numbers, but they need to be considered in the context of the company's prospects, and the risks in its business.
Two Main Approaches
There are two main approaches:
Relative valuation –how does the company's share price compare with other companies in the same sector, or the market as a whole?
Future income - by forecasting the future profits, cash flow, dividends or other economic factors of the company.
How Much Time Have You Got?
If investing is your day job, then you have the time to build comprehensive financial models and make sensible forecasts from which discounted cash flow valuations can be derived. That is what a stockbroker's analyst, covering a handful of companies all in the same sector, will do.
But the amount of time and effort required to use DCF and other forecasting methods means that they are not very often practical tools for the individual investor.
The Relative Valuation Approach
So I am a fan of the relative valuation approach -- and not just for basic share valuation metrics such as P/E ratio and dividend yield. It is very instructive, when researching a company, to look at one or more other companies in the same sector. Apart from the numbers, the most useful things to compare include:
• Business mix and geographical coverage;
• The business model and strategy; and
• What the management says about trading conditions and prospects.
If you only look at one comparative company, choose a large, well-researched one which makes some effort, in its accounts and/or on its website, to explain its strategy and the important trends and developments in its industry.
Consensus Forecasts
There is one important area in which private investors can benefit from the analysts' financial models. Consensus forecasts of revenues, earnings and dividends are widely available for most stocks. These are averages of the forecasts of all the analysts covering a stock, and as companies give "guidance" about their prospects, forecasts for the next year end are based on more than just idle speculation.
So where possible I would usually use the prospective P/E ratio and dividend yield (based on the forecast for earnings and dividend for the next year end) in comparing companies.

Approach
Putting all this together, my approach is:
1. Choose one or more comparator companies.
2. Learn about the sector, and how the business and strategy of the company compares with others in the sector. From this you can form a view as to the prospects and downside risks for the company.
3. Compare the basic valuation measures: prospective (or historic) PE, dividend yield, PEG ratio etc. This is a good time to look at analysts' recommendations.
4. If the basic valuation measures do not make sense, then look at other valuation measures such as price/sales or price/book value.
5. Look at how the share price has performed over the past twelve months (or longer).
6. Examine and compare the operating performance: revenues, margins, return on capital etc.
7. Examine and compare the financial strength: gearing, dividend cover, cash flow, tangible assets etc.
8. Look for any hidden liabilities or value, e.g. pension fund deficits, over- or under-valued properties.

A Comparison Table
Drawing up a table such as the one attached below is a quick and easy process which helps focus attention on what may be driving the market's valuation of a share.
All of the numbers can be taken from CSE Company Financial Info or Bloomberg of this website, with just a little bit of arithmetic required for the revenue growth and cash flow ratios.

Valuable comments are appreciated
Edited article from Investing Stratergy
Attachments
The Basics Of Valuing Companies AttachmentComparison Table.xlsx
You don't have permission to download attachments.
(10 Kb) Downloaded 115 times

http://sharemarket-srilanka.blogspot.co.uk/

2The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Sat Oct 22, 2011 9:45 pm

amilaela

amilaela
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
ela

https://www.facebook.com/profile.php?id=100001851586843

3The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Sun Jan 01, 2012 5:11 pm

Light of Hope


Vice President - Equity Analytics
Vice President - Equity Analytics
just read this. looks valuable info, thanks

4The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Sun Jan 01, 2012 5:13 pm

bakapandithaya

bakapandithaya
Vice President - Equity Analytics
Vice President - Equity Analytics
Thnkx sri 4 sharing

5The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Sun Jan 01, 2012 9:16 pm

ISURU

ISURU
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Good one! thanks

6The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Sat Mar 10, 2012 11:37 am

rmark

rmark
Manager - Equity Analytics
Manager - Equity Analytics
Sriranga, valuable information, thank you for sharing.

7The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Sat Mar 10, 2012 1:13 pm

LateTackle

LateTackle
Senior Equity Analytic
Senior Equity Analytic
Very useful. Thanks for sharing

8The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Sat Mar 10, 2012 1:17 pm

trasantha


Senior Equity Analytic
Senior Equity Analytic
Tks Smile

9The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Sat Mar 10, 2012 3:08 pm

suny j


Stock Trader
Thanks vary good one ...as allways I appriciate your articles ....

10The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Mon Mar 12, 2012 9:21 am

yellow knife


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Thanx

11The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Sun May 05, 2013 6:13 pm

KDDND

KDDND
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Thx Sri! reading this gives more knowledge!
Bit of home work to do! Smile

12The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Fri Nov 28, 2014 1:26 pm

zoozzoo


Manager - Equity Analytics
Manager - Equity Analytics
valuable post...

13The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Fri Nov 28, 2014 8:33 pm

nnk


Equity Analytic
Equity Analytic
Thanks for the post. Can some one tell me why I can not download this. Sad

14The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Fri Aug 26, 2016 1:39 pm

Bullrunner7

Bullrunner7
Manager - Equity Analytics
Manager - Equity Analytics
Good read !

15The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Fri Aug 26, 2016 2:09 pm

SLBOY


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@nnk wrote:Thanks for the post. Can some one tell me why I can not download this. Sad

 Same Here  Sad

16The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Tue Aug 30, 2016 12:01 am

EquityChamp

EquityChamp
Moderator
Forum require more of these coz of growing number of learners.

17The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Tue Aug 30, 2016 12:02 am

Bullrunner7

Bullrunner7
Manager - Equity Analytics
Manager - Equity Analytics
Yes I agree !

18The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Tue Aug 30, 2016 12:03 am

EquityChamp

EquityChamp
Moderator
Ha Boy............. How are you doing.

19The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Tue Aug 30, 2016 12:04 am

Bullrunner7

Bullrunner7
Manager - Equity Analytics
Manager - Equity Analytics
I'm doing good ! 
How are you EC ?

20The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Tue Aug 30, 2016 12:09 am

EquityChamp

EquityChamp
Moderator
Living good same as ever before. need to be with the forum as well but time is the issue for me.
Isn't it a good idea to study about a stock of your liking and let us know what do you think. Trust I have taught boys like you how to look at a stock to identify future winners..

21The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Tue Aug 30, 2016 12:16 am

Mubin Mustafa


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
good article

22The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Tue Aug 30, 2016 12:17 am

Bullrunner7

Bullrunner7
Manager - Equity Analytics
Manager - Equity Analytics
That's good to hear !
Yeah Time is real hard to mange nowadays but I trust you'll work everything out !
I've been thinking about talking about a stock I like Although I'm currently interested in the banking side of CSE, I'll come through with something to talk about in the near future !

23The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Mon Dec 05, 2016 10:00 pm

jehovah

jehovah
Equity Analytic
Equity Analytic
thanks...... lol!

24The Basics Of Valuing Companies Empty Re: The Basics Of Valuing Companies on Tue Dec 06, 2016 12:40 am

ayesh84

ayesh84
Stock Analytic
Stock Analytic
Golden! Thank you very much for the knowledge sharing posts!

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum