Value

Understand an Calculate the Capital Asset Pricing Model (CAPM)

Investors calculate the capital asset pricing model (CAPM) to analyze the relationship between risk and return when pricing securities. CAPM provides a valuable data point to the investor based on the idea that a certain level of compensation is to be expected given an element of risk. In calculating CAPM, the formula incorporates [...]

The Importance of a Company’s Breakup Value

Breakup value refers to how much a company would be worth after the components of the company were sold off and all of the its liabilities were paid. Usually the breakup value is derived by looking at each segment of the company independently to arrive at the resale value of each. A breakup [...]

What “Catch a Falling Knife” Can Mean to a Value Investor

“Catch a falling knife” is a phrase used by stock investors to describe a stock that has decreased sharply in value in a short amount of time. While many new investors see falling stock prices as an opportunity for purchase, it can be a risky strategy. Although a stock whose price is falling [...]

What is an Asset Play in Stock Investing?

An Asset Play refers to a stock that represents an attractive investment opportunity because its total asset value exceeds its current market capitalization. An asset play presents a particularly good opportunity for value-oriented investors who often look to purchase these stocks with the expectation that the market will correct itself and leave them with [...]

The Basics of Value Stock Investing

Value Stock is a term used to describe a stock that is trading at a price that is less than its real or “intrinsic” value as determined by its fundamentals. Value investors employ a strategy of finding stocks that are trading at a deep discount when compared to the intrinsic value; the size of [...]

The Price/ Earnings Ratio and Value Investing

The price-to-earnings (P/E) ratio is used to measure the price an investor would pay for a stock relative to its earnings per share (EPS). The P/E ratio provides a measure of valuation as a higher P/E ratio would mean that investors are paying more for company earnings compared to stocks with lower P/E ratios. [...]

The Benjamin Graham Stock Investing Strategy

The Stock Research Pro Software and SRP Valuation software are designed to provide value investors with the data and tools to conduct fundamental and value investing analysis of stocks, leveraging the formulas introduced by Benjamin Graham in his books and teaching. Both software packages guide the investor to the company financial statements and other [...]

Benjamin Graham: The Father of Value Investing

Benjamin Graham (1894 – 1976) was an American economist and a professional investor and is considered the “father of value investing”. Graham developed a track record of earning solid returns in the stock market for himself and his clients and for doing so without taking enormous risks. He began teaching this investment [...]

Separating Value Stocks from Value Traps

A Value Trap stock is a stock that has had a dramatic price drop and may be falsely perceived to be a value stock. While a stock that is trading a low price/earnings (P/E) ratio or some other low valuation measure might be at that price level for good reason, investors may be drawn [...]

Choosing a Discount Rate for
Discounted Cash Flow Stock Valuation

The discount rate is an interest rate used to determine how much future cash flows are worth today. Discount rates are used in valuation analysis when cash flows are expected to be received over long periods of time. The discount rate is expressed as an annual percentage and is one of the critical components [...]