Intrinsic Value of a Stock
4.6 هزار بار بازدید -
3 سال پیش
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In this video you'll learn
In this video you'll learn how to calculate intrinsic value of a company / stock.
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Intrinsic value can is the discounted value of the cash that can be taken out of a business during its remaining life.
Intrinsic value is always going to be an estimate. And that’s why when you hear about intrinsic value, the next thing you hear about is the idea that you have to “invest with a margin of safety.”
Joel Greenblatt says he guarantees that if they do a good job valuing a company, Mr. Market will eventually agree with them.
And that, although it can take longer, if their analysis is correct, it can take only a few weeks or a few months, but usually two or three years is all the time they’ll have to wait for Mr. Market to reward their bargain purchases with a fair price.
To calculate the intrinsic value of a stock we need to know how much cash the company will be able to make in its remaining life time, and we need to know the present value of those future cash flows.
Owners earnings is the amount of cash that owners could take out of the business without hindering its competitive position.
Owner earnings are calculated by taking operating cash flows and subtracting maintenance capital expenditures.
Operating cash flow is the amount of cash generated by a company in a given period through its regular business activities.
Maintenance capital expenditures is the amount of capital required to maintain its current form and competitive position.
Unfortunately businesses are not required to break out how much of their cap ex is for maintenance and how much is for new growth.
Instead of using maintenance capital expenditure we can just use total capital expenditure - which will be listed on the cash flows statement as purchase of plant property and equipment.
Operating Cash flows minus Capital expenditures is also known as free cash flow.
You start by estimating the future cash flows and then you calculate the present value of those future cash flows.
The discount rate you discount the future cash flows at does not need to be overly complicated. You can simply think of the discount rate as annual rate of return you wish to achieve.
I prefer to estimate cash flows into perpetuity (in practise i go out 100 years) because I'd rather estimate future cash flows than predict a future multiple a stock will be trading at.
Special thanks to my incredibly beautiful, smart, and creative girlfriend, Stephanie, for her editing wizardry and creative insights and ideas. This isn't possible without you.
Disclaimer:
These youtube videos and content are for entertainment purposes only. If stocks or companies are mentioned, Richard may have an ownership interest in them -- DO NOT make buying or selling decisions based on Richard’s videos. All information contained herein should not be construed as anything other than an opinion for entertainment purposes only. Information being provided may be outdated or inaccurate; it is your responsibility to verify all information.
No financial advice is being given nor is any other advice of any kind. You should consult with a qualified professional where appropriate and before any action is taken on this video. No liability or damages shall take place because of this video and/or content.
There is no express or implied representations or warranty with respect to the accuracy or completeness of the content of the videos, including any content, description, links, or resources shared, including those by third parties. Furthermore, all parties specifically disclaim any and all express or implied warranties of merchantability or fitness for a particular purpose. By watching this and all related videos, you agree to be bound by this disclaimer.
#StockInvesting #StockMarketForBeginners #HowToInvest
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BEST INVESTING BOOKS
📚 The Little Book That Still Beats the Market
➜ https://amzn.to/3fkkscB
📚 The Outsiders
➜ https://amzn.to/3jeFcmW
📚 100 Baggers
➜ https://amzn.to/3A3Nt49
📚 The Complete Investor
➜ https://amzn.to/2V3Saw5
📚 Richer, Wiser, Happier
➜ https://amzn.to/3igSvUC
📚 The Dhandho Investor
➜ https://amzn.to/3ykf1l9
📚 Tao of Charlie Munger
➜ https://amzn.to/2V9FgMM
📚 The Complete Financial History of Berkshire
➜ https://amzn.to/3kRFRNp
🙋♂️ Watch Next to Keep Learning (YouTube Playlist):
➜ How stocks work explained simply
🛎 SUBSCRIBE (Click to subscribe):
➜ @intelligentstockinvesting
Intrinsic value can is the discounted value of the cash that can be taken out of a business during its remaining life.
Intrinsic value is always going to be an estimate. And that’s why when you hear about intrinsic value, the next thing you hear about is the idea that you have to “invest with a margin of safety.”
Joel Greenblatt says he guarantees that if they do a good job valuing a company, Mr. Market will eventually agree with them.
And that, although it can take longer, if their analysis is correct, it can take only a few weeks or a few months, but usually two or three years is all the time they’ll have to wait for Mr. Market to reward their bargain purchases with a fair price.
To calculate the intrinsic value of a stock we need to know how much cash the company will be able to make in its remaining life time, and we need to know the present value of those future cash flows.
Owners earnings is the amount of cash that owners could take out of the business without hindering its competitive position.
Owner earnings are calculated by taking operating cash flows and subtracting maintenance capital expenditures.
Operating cash flow is the amount of cash generated by a company in a given period through its regular business activities.
Maintenance capital expenditures is the amount of capital required to maintain its current form and competitive position.
Unfortunately businesses are not required to break out how much of their cap ex is for maintenance and how much is for new growth.
Instead of using maintenance capital expenditure we can just use total capital expenditure - which will be listed on the cash flows statement as purchase of plant property and equipment.
Operating Cash flows minus Capital expenditures is also known as free cash flow.
You start by estimating the future cash flows and then you calculate the present value of those future cash flows.
The discount rate you discount the future cash flows at does not need to be overly complicated. You can simply think of the discount rate as annual rate of return you wish to achieve.
I prefer to estimate cash flows into perpetuity (in practise i go out 100 years) because I'd rather estimate future cash flows than predict a future multiple a stock will be trading at.
Special thanks to my incredibly beautiful, smart, and creative girlfriend, Stephanie, for her editing wizardry and creative insights and ideas. This isn't possible without you.
Disclaimer:
These youtube videos and content are for entertainment purposes only. If stocks or companies are mentioned, Richard may have an ownership interest in them -- DO NOT make buying or selling decisions based on Richard’s videos. All information contained herein should not be construed as anything other than an opinion for entertainment purposes only. Information being provided may be outdated or inaccurate; it is your responsibility to verify all information.
No financial advice is being given nor is any other advice of any kind. You should consult with a qualified professional where appropriate and before any action is taken on this video. No liability or damages shall take place because of this video and/or content.
There is no express or implied representations or warranty with respect to the accuracy or completeness of the content of the videos, including any content, description, links, or resources shared, including those by third parties. Furthermore, all parties specifically disclaim any and all express or implied warranties of merchantability or fitness for a particular purpose. By watching this and all related videos, you agree to be bound by this disclaimer.
#StockInvesting #StockMarketForBeginners #HowToInvest
3 سال پیش
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