Value

Book Value Per Share and Value Investing

Investors often want to know the book value of a common stock to understand what they would receive as payment for each share with regard to the worth that is shown on the company balance sheet. In cases where a company is being liquidated, the book value is used at to pay off company shareholders. [...]

Earnings Yield and Value Investing

The Earnings Yield is the ratio of a company’s last twelve months of earnings per share to its stock price. The result is an estimate of how much in earnings stockholders can expect to receive for each dollar paid for the stock. The earnings yield is the inverse of the Price/Earnings (P/E) ratio and [...]

Value Investing and a Margin of Safety

Investing with a margin of safety is a principle conceived of by Benjamin Graham, who is considered by many to be the “father of value investing“. Under this principle, the investor looks to purchase when the actual or “intrinsic” value of the stock is believed to be significantly above the market price. The [...]

The Price/Earnings (P/E) Ratio: Definition and Use

The P/E ratio (price-to-earnings ratio) measures the price of a share relative to company earnings company earnings on a per share basis. A higher P/E ratio indicates a willingness by investors to pay more for a unit of income. The measure is most valuable when viewed over time for the emergence of a trend. [...]

The Stock Beta Measure and Value Investing

Value investing is an investment style which “favors good stocks at great prices over great stocks at good prices”. The approach is based on the principle that stocks are not always priced efficiently. With this in mind, value investors seek to acquire stocks that are currently trading at less than their perceived (“intrinsic”) [...]

The PEG Ratio in Stock Valuation

The PEG Ratio (Price/Earnings to Growth), popularized by Peter Lynch in his book, “One Up on Wall Street”, is a measure of valuation that analyzes the relationship between stock price, earnings per share, and the expected growth of the company. The theory is that a fairly-priced stock will have a PEG of 1, while [...]

What is “Rule 1 Investing”?

Rule #1 investing was coined by Phil Town (www.ruleoneinvestor.com). It is based on a philosophy ascribed to Columbia University’s Benjamin Graham (author of The Intelligent Investor), and popularized by Graham’s student, Warren Buffet (perhaps the most well-known investor of all time). Town believes that “Most Americans are trapped in mutual funds that, at [...]

Determining Stock Intrinsic Value

A stock’s intrinsic value is the perceived “real value” of a stock as calculated through the value of a company’s expected future cash flows and other factors. If the value is determined to be higher than what the stock is currently priced at, the stock is considered to be undervalued. There is no [...]

Finding Undervalued Stocks

According to value investors, undervalued stocks can be found under any market conditions. These investors believe that the stock market is not always efficient at pricing stocks and that fundamentally sound stocks trade at an undervalued price at any given time. In the long run, it is believed the market for these securities will correct, [...]

What is a Value Stock?

A value stock is a stock that has low market value relative to its book value or net worth. These stocks are often the “cheapest” stocks in the market, because they trade at a low price in relation to their revenue, earnings, or book value. A value stock is often found in large, [...]