Describe how shares of a company are valued

Hi Chandrakumar!

The prices in the stick market is mainly determined by supply and demand. Like when a stick is sold, money is exchanged between the seller and the buyer. This amount is the Market Price. Next, when another stock is being sold, that amount becomes the new Market price now.

The company's shares are predicted by Dividend Discount Modules (DDM) where it is the cost of the present stock is equal to the sum of total of all its future payments.

A company's capitalisation = Share Price x Number of Shares Outstanding.

Hope this is helpful!

Hello Student,

A company's  book  value  is equal to a  company's  assets minus its liabilities (found on the  company's  balance sheet). The book  value  per share is determined by dividing the book  value  by the number of outstanding  shares  for a  company  . Finally, to solve for the ratio, divide the share price by the book  value  per share.

Hope it helps

Hi.

Valuing stocks is an extremely complicated process. Investors may be overwhelmed by the amount of available information that can be potentially used in valuing stocks (company’s financials, newspapers, economic reports, stock reports, etc.).

Therefore, an investor needs to be able to filter the relevant information from the unnecessary noise. Additionally, an investor should know about major stock valuation methods and the scenarios in which such methods are applicable.

Popular Stock Valuation Methods:

1. Dividend Discount Model (DDM)
2. Discounted Cash Flow Model (DCF)
3. Comparable Companies Analysis

If you have a further specific question, please feel free to ask

Good Luck