Frequently Asked Questions
What is the purpose of this site?
The purpose of this website is to get a general understanding of how stocks perform in comparison to what they truly should be valued at. The goal of this site was to find the intrinsic or fair value of the stock based off of market conditions and performance. Through loads of research, I have nailed 6 key factors that are intgral towards finding this valuation.
What is an intrinsic (fair) value?
An intrinsic or fair value represents what the stock should be priced at given market conditions, price ratios, and general growth. The valuation forms a base of how strong and stable the company is and it includes long term prospects. Similar to the appraisal of a house, this site shares the appraisal of a stock price.
Why use weightages?
Weightages give a better idea of a more realistic value. Currently, I value sales to predominantly weigh in on my fair value. This is because Sales ratios are best under unstable circumstances such as the economic condition that is present in 2020. Additionally, weightages can be considered outliers and it is important to focus on more realistic values. Weightages provide for a more realistic value.
What is a weighted value?
I used a weightage and multiply it by its corresponding valuation. Adding all these weighted values gives me a weighted sum or weighted average which will be used as my fair value. I only use this to show my work. To see the real valuations, please look at the valuations table.
What is a Margin of Safety?
Benjamin Graham, the father of investing, concluded that his valuation wasn't perfect. It was on the basis of a growth prediction model and so he advised that one should buy a stock at a margin of safety in order to meet expected returns in the worst case. I simply take 20% off the Fair Value to calculate this value. If you see that the current price is near or below the Margin of Safety, the stock is undervalued and it's time to buy!
How accurate are the numbers?
I try to test multiple valuations based off of the health of our economy. So far in my research, I have come across 8 impotant ones that figure into making the valuations as accurate as possible. These valuations may be seen as very high or very low numbers, but they match the calculations of precise price ratios and increase with growth, stability, better economic conditions, and long term potential.
When should I buy the stock?
If it is possible to buy the stock below the fair value with a margin of safety, it is highly recommended to buy the stock as it is extremely undervalued and it is considered safe to buy the stock. In the worst case, you will break even.