First, the dividend benchmark model is to evaluate the value of stocks with the dividend rate as the standard, which is particularly useful for investors who want to get cash flow income from investment. The simplified calculation formula can be used: stock price = expected dividend in the coming year/rate of return required by investors.
second, the most widely used profit standard ratio is price-earnings ratio \(PE\), and its formula: price-earnings ratio = share price/earnings per share. Using P/E ratio is simple to calculate and easy to collect data, which is called historical P/E ratio or static P/E ratio. However, it should be noted that in order to reflect the future trend of stock prices more accurately, the expected P/E ratio should be used, that is, the expected return should be substituted into the formula. It should be noted that the P/E ratio is a relative indicator reflecting the market's expectation of the company's earnings. We should use price earning ratio from two relative angles: one is the relative change of the company's expected P/E ratio and the historical P/E ratio, and the other is the comparison between the company's P/E ratio and the industry average P/E ratio. Therefore, the price-earnings ratio should be viewed relatively, not high price-earnings ratio is bad, but low price-earnings ratio is good.
iii. the book value ratio of the market price \(PB\), that is, the price-to-book ratio, whose formula is: price-to-book ratio = share price/net asset value per share. This ratio is the basis for estimating the stock price from the perspective of the company's asset value. It is more appropriate to analyze the stock valuation of enterprises whose assets and liabilities are mostly composed of monetary assets, such as banks and insurance companies.