When to Buy and When to Sell - Determining the Right Value of a Stock

Autor: Šperanda, Ivo, Piplica, Damir
Přispěvatelé: Mašek Tonković, Anka
Jazyk: angličtina
Rok vydání: 2017
Předmět:
Popis: The “wisdom” behind trading in the stock exchange market, primarily with stocks, is to know if a stock is overvalued or undervalued in the market at a particular moment. Only when obtaining that information, we can start a serious and responsible stock trade. We often hear how investment advisers and experts advocate collecting as many relevant information as possible, before coming to an investment decision, but ironically don’t advise how to come to a decision from the collected information. From this it can be concluded that investing is actually more art than not science, and that the true value of a stock can be revealed through inspired intuition. The market price of a stock is not always its fair price, a great interest for a stock can rise its price too high only to drop it too low. This paper explains and suggests how to determine the real, i.e. normal value of a stock. To determine that value, this paper considers certain stock valuation methods and their interrelationship with the firm valuation methods. Information on overvaluation and undervaluation of a firm’s stock on the market can be provided by composite indicator [(C(hm)] whose structure and role are discussed in this paper. The value of the indicator refers the potential investor to an appropriate stock market move. It’s important to mention that this paper approaches the stock evaluation as an ideal segment of a firm. The quality of firm’s business and its potentials are often strong indicators of the stock value in long term. This paper also includes a relatively unknown firm valuation method, the Compounded Cash Flow method (CCF). Combined with the usual methods, it provides a more precise firm evaluation, i.e. more precise stock evaluation. The goal of this paper is to show the possibilities of a thorough and comprehensive stock value analysis with an end to choose a suitable moment to sell or to buy on the stock market.
Databáze: OpenAIRE