How to Value Stocks

How to Value Stocks
By Motley Fool Staff May 23, 2008 Comments (3)

So just how do you value the shares of a company? Should you look at earnings, revenues, cash flow, or something else entirely? Do you need to apply one or several valuation methods to discern what the fair price for a share of stock would be?

In this series of informative articles, Fools can learn many ways to value a company's shares, as well as helpful methods to determine whether or not a stock is undervalued right now.

How to Read a Balance Sheet
These articles explore the mechanics of a balance sheet and define the items that go into one. Readers will understand how to use this knowledge most effectively to pick stocks.

Introduction to Valuation Methods
How do you value the shares of a publicly traded company? This helpful series details the many and varied ways one can understand the fundamentals about a company's business to value its shares. You can learn to use earnings, revenues, cash flow, equity, dividend yield, and subscribers to figure out how much a company is worth.

Return on Equity
Disarmingly simple to calculate, return on equity (ROE) stands as a crucial weapon in the investor's arsenal if properly understood for what it is. ROE encompasses the three main "levers" by which management pokes and prods the corporation -- profitability, asset management, and financial leverage. This series walks you through how to use ROE to value stocks.

A Look at ROIC
(Return on Invested Capital)It isn't profit margins that determine a company's desirability; it's how much cash can be produced by each dollar of cash that is invested in a company by either its shareholders or lenders. Measuring the real cash-on-cash return is what return on invested capital (ROIC) seeks to accomplish. This series is an introduction to how ROIC is calculated.

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