Valuation is a critical part of successful investing. You probably have never placed a value on something because it is already done for you when you shop in stores. Consumer items like jeans, pizza, and every other item has a price. You decide if the price (or valuation) is fair. If the price of a pair of jeans is fair to you, then you buy the jeans. If you think that the jeans are overpriced, then you choose not to buy them. Valuing stocks is much more complicated than buying jeans or a pizza.
Future
Valuing stocks is difficult because it involves the future and uncertainty. By comparison, the pizza in the above example will be eaten very soon. The jeans will probably only be worn for a few months. These are relatively short periods of time. In addition, you are buying stocks to make money. You buy jeans and pizza to satisfy a need or a desire.
Valuation Techniques
There are many ways to value a stock. The technique we will use....
Valuation
Valuation is a critical part of successful investing. You probably have never placed a value on something because it is already done for you when you shop in stores. Consumer items like jeans, pizza, and every other item has a price. You decide if the price (or valuation) is fair. If the price of a pair of jeans is fair to you, then you buy the jeans. If you think that the jeans are overpriced, then you choose not to buy them. Valuing stocks is much more complicated than buying jeans or a pizza.Future
Valuing stocks is difficult because it involves the future and uncertainty. By comparison, the pizza in the above example will be eaten very soon. The jeans will probably only be worn for a few months. These are relatively short periods of time. In addition, you are buying stocks to make money. You buy jeans and pizza to satisfy a need or a desire.Valuation Techniques
There are many ways to value a stock. The technique we will use....