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Stock Valuation

Many people buy stocks out of speculation – when they have a gut feel that it will go up or after they have heard some rumors about the stock. Many do not take the time to determine how much the stock is worth. They think that stock valuation is too difficult and can only be done by investment professionals.

ProThinker’s tagline is “Think like a Pro instantly!” I believe that with the right tools, we can do stock valuation accurately and effortlessly. By leveraging technology, we can automate all the mundane tasks of collecting information and calculating formulas to arrive at a mathematically correct valuation of the stock. We are also able to automatically analyze other pertinent aspects of the stock that affects its valuation, namely its growth potential, financial condition, quality of earnings, operational efficiency, etc.

A unique approach is used to value stocks. Instead of valuing a stock separately via different valuation methods – Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book, Dividend Yield – and arriving at different conclusions about the stock, a combination method is used to value the stocks based on the best combination of the five indicators. Using this method, you get only ONE CONCLUSION on whether the stock is overvalued or undervalued. You could read more about this unique stock valuation approach here. Furthermore, we should never rely on any indicator to tell us whether a stock is overvalued or undervalued unless we have determined visually that this indicator has explained the stock prices well in the past.

Please read the Articles section to see how this tool is used to identify stocks that look attractive. The Posts section contains many other examples of how a portion of this tool is applied to do stock valuation.

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