Calculation method of stock valuation
There are five methods for stock valuation.
1, P/E ratio valuation method
P/E ratio is called PE for short, so it is also called PE valuation method. P/E ratio refers to the ratio of stock price to earnings per share, which is a very simple but effective valuation method. The key of this method lies in the determination of earnings per share. If a company's earnings per share in the next few years is a fixed value, then PE represents the annual line of this fixed profit level. But in fact, PE is almost impossible to remain unchanged, because it has a great relationship with the macro-economy and the life cycle of enterprises. Therefore, when we use PE for valuation, earnings per share is particularly important, which can have two different meanings. One is the historical earnings per share, which is true, and the other is the forecast of future earnings per share. In this case, the accuracy of prediction is the most important. In fact, earnings per share is the most important thing.
2. Valuation method of market income growth rate
Market profit growth rate is abbreviated as PEG, which is the ratio between P/E ratio and long-term net profit growth rate. The growth rate of net profit can be replaced by the growth rate of pre-tax profit/operating interest/revenue, so the higher the P/E ratio, the more overvalued the stock is. Any stock must be linked to its growth, and the problem of adapting to the growth rate is actually the same as the price-earnings ratio. The market profit growth ratio can be used to evaluate companies that are profitable in different industry cycle stages, especially for high-growth enterprises such as science and technology, but its disadvantage is that it has no effect on negative-growth enterprises.
3. P/B valuation method
P/B ratio, referred to as PB, is the ratio between equity value and book value of net assets. It should be noted that intangible assets need to be excluded when calculating the book value. The advantage of price-earnings ratio valuation method is that it can also solve the historical cost accounting problem of financial institutions that need to adjust market prices, which is better than price-earnings ratio, because price-earnings ratio can only look at the problem of one accounting cycle. However, the profit and loss method also has certain limitations, and is generally applicable to financial industry, manufacturing industry and asset-intensive industries.
4. Valuation method of market price
Marketing ratio is abbreviated as PS, and the calculation method is PS (price-income ratio) = total market value/operating income = (stock price * total number of shares)/operating income. Therefore, the advantage of the marketing rate is that the sales revenue is stable, the fluctuation is small, the operating income is not affected by the company's depreciation, inventory and non-recurring income and expenditure, and the income will not be negative, so there is no invalidity. It can be used as a good supplement to the price-earnings ratio valuation method, but it also has some shortcomings, that is, it cannot reflect the company's cost control ability. Even if the company's costs rise and profits fall, it still has no effect on the marketing rate, so the larger the business scale, the lower the marketing rate. In this case, the marketing rate index can only be used as an auxiliary reference index.
5. Enterprise value and earnings before interest and tax valuation method.
The usage rate of this method is not high, and few people know it. Due to the limited application scope, this method separates the core operating performance of enterprises from the influence of financial decision-making and taxation. However, unadjusted earnings before interest and tax still include non-cash expenses (monthly amortization and depreciation), one-off items and different accounting treatment methods between enterprises, which affects the quality of comparative valuation. In use, it is usually necessary to manually adjust the earnings before interest and tax. Therefore, listed companies must make a profit when using this method for valuation. This method is only applicable to enterprises with low capital intensity, such as service industry.