Before investing in a company, we all value it. Valuation is an estimate of the stock price. Its value lies in knowing whether the company is likely to be overvalued or undervalued. Valuation is a systematic project. It is by no means that an accurate future can be calculated by setting a formula with several indicators.
An enterprise needs multi-angle analysis and multi-method estimation. Evaluation should be qualitative before quantitative, and qualitative is much more important than quantitative. Let's share three valuation methods today and see which one is better.
The commonly used valuation method of P/E ratio may be what we often use, that is, P/E ratio = share price/earnings per share. According to the data selected by earnings per share, different P/E ratios can be divided into three types: static P/E ratio, dynamic P/E ratio and rolling P/E ratio.
Dynamic P/E ratio is generally used to predict and evaluate the stock price, and its estimation formula is: stock price = dynamic P/E ratio × earnings per share. Here is an estimate of the budget, in which the P/E ratio is generally the average P/E ratio of the sub-industry where the enterprise is located.
If it is a leading enterprise in the industry, the P/E ratio can be increased by more than 10%, and the profit is based on the predicted earnings per share that the company can maintain in the future.
Note: P/E ratio is applicable to the valuation of growing companies. The valuation of industries with development prospects and imagination will be higher.
Because the P/E ratio is related to the growth of the company, and the growth of different industries is different, it is of little significance to compare the P/E ratios between companies in different industries. Compare the P/E ratio more than yourself and more than your peers.
2.2. Valuation method. PEG is limited by the P/E ratio, which represents the time required for these stocks to recover their investment costs.
P/E ratio PE = 10, which means that the investment of this stock can be recovered in 10 years, but the P/E ratio of some stocks exceeds 100 times, so it is not appropriate to use P/E ratio for valuation.
This requires PEG valuation method, that is, comparing the P/E ratio with the growth of company performance, that is, the ratio of P/E ratio to profit growth. Its calculation formula is PEG=PE/ annual profit growth rate of enterprises × 100%, which is one of Peter Lynch's favorite valuation methods.
This is suitable for industries and enterprises with good performance and good growth. Generally speaking, when choosing stocks, the smaller the PEG, the safer it is, but PEG >；; 1 does not mean that the stock must be overvalued.
If a company's stock PEG = 12, but the stock PEG of the same industry is above 15, then the company's PEG is greater than 1, but its value can still be underestimated.
PEG, like other financial indicators, cannot be used alone, but must be used in combination with other indicators. The most important thing here is the expectation of the company's performance.
3. Price-earnings ratio valuation method. P/E ratio refers to the ratio of share price to net assets per share. Generally speaking, the investment value of stocks with low P/E ratio is relatively high, and the investment value of stocks with low P/E ratio is relatively low. The calculation formula is: share price = P/E ratio × latest net assets per share.
This valuation method is suitable for enterprises with large and stable assets, such as traditional enterprises such as steel and construction, but not for enterprises with small scale and dominant labor costs such as it and consulting.
The analysis still continues the principle of peer ratio and historical ratio, and the P/E ratio is usually low, so the investment is relatively safe to some extent.
According to the classification of industries by CSRC, the price-earnings ratio is as follows: food and beverage industry >; Information technology industry > manufacturing industry > mining industry, while bank stocks have the lowest P/E ratio.
The food and beverage industry has the highest P/E ratio, and the P/E ratio of enterprises over 65% is generally between 1~2. Does this mean that bank stocks are undervalued? Not necessarily, because banks have a lot of bad assets.
This is also a limitation of the price-earnings ratio valuation method. Enterprises' machinery, equipment and office supplies will depreciate, but historical cost estimation and price-to-book ratio can't reflect the general situation.
Therefore, don't think that buying stocks with low P/E ratio is a bargain. It is likely that their actual value is already book value.
Finally, to sum up, P/E ratio is a commonly used indicator for valuation. PEG valuation method is a supplement to P/E ratio valuation method, which is suitable for the valuation of growth enterprises.
The P/B ratio is suitable for those enterprises with relatively large and stable net assets. In addition to these valuation methods, there are actually many valuation indicators, and we can't just use one indicator to screen and judge.
The growth of the company is the best moat, because good track, good industry, good products, good management and constant innovation can achieve sustained growth and high-speed growth with quality.
The overall evaluation of the company's capabilities and resources in all aspects should pay attention to the company's ability to create profits while paying attention to growth.
In a sense, profit and growth are interchangeable, that is, in the early stage of market development, companies can sacrifice profits to expand the market scale and cultivate customers.
When the market is mature, it is not our ideal goal to improve the profitability and reduce the growth rate through operating leverage.
No matter how cheap this company looks, it can't fall into the price trap for the sake of temporary cheapness. Some companies have gone astray, such as immortal creatures.
Valuation is both a science and an art. If you want to make money in the capital market, you must thoroughly understand the scientific side of various valuation technologies before you can be creative.
. There is no capital requirement, and opening an account is just in case.