Tag Archives: value

Determining the Intrinsic Value of a Stock using EPS Growth Capitalization

Determining the Intrinsic Value of a Stock using EPS Growth CapitalizationValue investors are concerned with determining what’s called the intrinsic value of the companies they wish to invest in. This intrinsic value nearly always differs from the actual trading price of the stock, presenting us with opportunities to buy for less than the company is really worth! See my recent article, “What is the difference between price and value?” for more on this topic. Today we’ll look at one of the popular methods of calculating intrinsic value using an estimated EPS growth rate and future PE ratio. This is called the EPS Growth Capitalization method and is detailed below. Continue reading

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What is the difference between Price and Value?

One of the most important concepts to grasp as a value investor is one that is perhaps not that intuitive to everyone. That concept is that the price of a stock and the value of a stock are two different things, and they are not necessarily equal – in fact they almost never are!

This is important, because value investors are interested in buying companies when the price is less than it’s true value. In other words we are bargain hunters, and seek to buy at the lowest price possible. But what exactly do we mean when we say that price is not the same as value? When IBM is trading at $60 per share, doesn’t that mean that it’s worth $60? The answer is no – let’s see why. Continue reading

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