There are 3 main points in valuing a stock
1)Value of the company now
2)Fundamentals of the company
3)future earnings
This is literally the basis of the discounted cash flow method where you
- Predict future cash flow(3)
- Compare it against the value of the company(1)
- Take a discount(margin of safety) based on how well you think the company can achieve these future cash flows (2)
1) is easy, load up any bloomberg terminal and you get the answer
When P/E bands are narrowly trading around 18-20x, you know 16 and below is cheap and vice versa
2) is also easy, grab the company's annual report, do the usually check on its cash flow, D/E ratio, margins, ROE/ROA etc and you get quick a good picture of the company
3) Now this is the hard one, and its also the point that essentially dictates whether you are going ......