Stock valuation

Stock valuation involves calculating an equity value of a company 's shares. Stock valuation can be made according to many different methods.

A share value depends on the company's future ability to generate profits and dividends to shareholders. Different methods of share valuation provides various equity value but an equity value usually depends mainly on the estimates made for the future.

Stock valuation is an uncertain science. The simplest and most conservative way to calculate an equity value is to calculate a company's net worth. The net asset value is calculated from the balance sheet, but the valuation of assets is made at fair value instead of at cost as they are usually valued in financial statements.

Stock valuation can be done by discounting dividends, earnings per share or cash flow per share.

Flow / (1 + discount rate^1) + .... Flow / (1 + discount rate^n )