The Definitive Guide: How to Value a Stock - Deepstash
What is A Share?

A single share of a company represents a small, but real, ownership stake in a corporation.

One stock's percentage of ownership is determined by dividing it by the total number of shares outs...

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The Definitive Guide: How to Value a Stock

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Why Should You Value Shares?

It is important to understand that the stock's intrinsic value is not necessarily directly tied to its current market price.

The efficient market hypothesis, a theory that states that all kno...

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The cornerstone to valuing stocks: The P/E ratio

The go-to metric for nearly all investors when it comes to valuing a stock has to be the P/E ratio. Standing for price-to-earnings, this formula is calculated by dividing the stock price by the ear...

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What's a good P/E ratio to buy a stock at?

Unfortunately, there's no P/E ratio set in stone that makes a stock a buy if it's below, or a sell if it's above.

Often value investors and growth investors will look for different things in...

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How growth investors can use variations of the P/E ratio

Growth investors often use the P/E ratio as a building block for finding two other metrics: the forward P/E and the PEG ratios.

  • The forward P/E is calculated by dividing the stock price ...

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The Price Sales Ratio

While using the P/E ratio as a building block is probably the most popular method to value stocks it is far from the only way. Another common technique to valuing stocks is the price/sales ratio. T...

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Price-to-book Ratio

Another metric useful for evaluating some types of stocks is the price-to-book ratio.

How to calculate?

  1. A...

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Final thoughts on valuing a stock

There's more to valuing a stock than just crunching numbers. Investors have to take into careful consideration qualitative factors also, such as a company's economic moat. Moats encompass companies...

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