StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Stock Valuation - Essay Example

Cite this document
Summary
In order to assess stock, assumptions are inevitable. Assumptions result to differences in opinions amongst people in the stock market. The two basic approaches for valuing stock are…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER98.7% of users find it useful
Stock Valuation
Read Text Preview

Extract of sample "Stock Valuation"

Stock Valuation al Affiliation) Due to its minor quantitative nature, it is effortful for markets and investors to value stock. In order to assess stock, assumptions are inevitable. Assumptions result to differences in opinions amongst people in the stock market. The two basic approaches for valuing stock are the ratio-based and the intrinsic value approaches (Damodaran, 2007). The former is the simplest measure in stock valuation, for this reason it is common. Common and preferred stocks are the two kinds of stock.

An equivalent value of stock by every investor is controversial in relation to the different kind of stocks aforementioned. Common stockholders are entitled to voting where shareholders come together and are recipients of dividends while a preferred stock is a bond at the same time, that is, it is a cross between a common stock and a bond (Damodaran, 2007). Some of its characteristics include scripted return, lack of maturity in most cases, ability to recover as a mature bond and conversion to a common stock.

In case of company bankruptcy, preferred stock holders are a priority in the payment of liquidated assets then the common stockholders. A direct implication of this is that the former mentioned stock preference is high regarding liquidation and some of its dividends are preferred. There are instances where dissolving a company results to no payments to the common stockholder. Therefore holding the same value for stock by investors goes against the principles of the two kinds of stocks in discussion.

An imbalance of the stock market is therefore inevitable in the long run.ReferenceDamodaran, A. (2007). Valuation Approaches and Metrics: A Survey of the Theory and Evidence (p. 92). Now.

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Stock Valuation Essay Example | Topics and Well Written Essays - 250 words - 2”, n.d.)
Stock Valuation Essay Example | Topics and Well Written Essays - 250 words - 2. Retrieved from https://studentshare.org/finance-accounting/1692579-stock-valuation
(Stock Valuation Essay Example | Topics and Well Written Essays - 250 Words - 2)
Stock Valuation Essay Example | Topics and Well Written Essays - 250 Words - 2. https://studentshare.org/finance-accounting/1692579-stock-valuation.
“Stock Valuation Essay Example | Topics and Well Written Essays - 250 Words - 2”, n.d. https://studentshare.org/finance-accounting/1692579-stock-valuation.
  • Cited: 0 times

CHECK THESE SAMPLES OF Stock Valuation

The dividend discount models

There are several methods of common Stock Valuation, some of which we discuss in this paper.... There are several methods of common Stock Valuation, some of which we discuss in this paper.... There are several methods, of common Stock Valuation, available to investors or analysts.... An important part of value investing is valuation of common stock.... Yield Based valuation ModelsThese models include the Cash Return method (Cash Return = Free Cash Flow + Net Interest....
3 Pages (750 words) Essay

'Common stock valuation'

Common Stocks do not have a maturity date Common Stock Valuation Submitted: Common Stock Valuation A stock exchange investor or a person, who invests in stocks of companies, does so with the intention of gaining a higher price for the stock and for the dividends and bonuses that the stock has to offer.... This model is referred as DVM or dividend valuation model.... A stock exchange investor or a person, who invests in stocks of companies, does so with the intention of gaining a higher price for the stock and for the dividends and bonuses that the stock has to offer....
2 Pages (500 words) Essay

Common stock evaluation

Stock… Stock Valuation is similar to bond valuation but difficult as cash flows are uncertain. Common Stock Valuation is very useful in any company.... It helps shareholders determine the worth of their Common Stock Valuation Introduction Common stock evaluation is the determination of the fair market price of a company's share.... Stock Valuation is similar to bond valuation but difficult as cash flows are uncertain....
2 Pages (500 words) Essay

Fair Price and Stock Valuation Techniques

The market value per share of GSK Stock Valuation VALUATION OF GLAXOSMITHKLINE'S (GSK) STOCKS.... 0p(stock-analysis-on.... (stock-analysis-on.... The data applied in the estimation stock's value is historical (up to December 2011), the market changes from that time may have affected the share prices.... The model also assumes constantly growing earnings per share; this assumption is not realistic and may over value a stock....
1 Pages (250 words) Essay

Dividend and Non-Dividend Stock Valuation

Second, it is Dividend and Non-dividend Stock Valuation Introduction According to Peris the discount growth model is a technique that is used to value dividend stocks and covers gains in both capital and dividends.... he dividend growth model attraction is intuitive and simple hence, not useful in the valuation of most companies except for a limited number of high dividend paying and stable stocks.... Equity asset valuation.... A capital gain indicates the appreciation of price on stock price while dividends provide a regular investment on income....
2 Pages (500 words) Research Paper

Common Stock Valuation and Cost of Capital

Common Stock Valuation and Cost of CapitalPart I: Common Stock ValuationWith supernormal dividends, stock prices are determined when dividends level-off at the prevailing constant growth rate.... This essay analyzes that with supernormal dividends, stock prices are determined when dividends level-off at the prevailing constant growth rate.... This is followed by the determining present value of future stock prices.... This is followed by the determining present value of future stock prices....
2 Pages (500 words) Case Study

Stock Valuation at Ragan Engines

Relative valuation of Ragan puts the company's stock price at $ 65.... Upon valuation, Ragan's stock price is $65.... The formula says that the value of a stock at time 0 (V0) is equal to the dividend next period (D1) divided by the required return on equity (r) minus the constant growth rate of dividends (g) (Hirschey, 2003). The value of the stock at time 0 (V0) is equal to the discounted… eam of dividends during the high growth phase, which grows at gs (the short-term growth rate) and the present value of the dividend stream growing in perpetuity at gL (the long-term growth rate) Ragan's current P/E of 7....
3 Pages (750 words) Case Study

Stock Valuation in Capital Markets

Stock Valuation is essential for every organisation as it helps in determining future ability of a firm's stock to generate healthy returns in future (Sharpe, Alexander and Bailey, 1999).... In this paper, the Stock Valuation has been performed for Pennon Group, Severn Trent,… The method that has been implemented in the assessment is Gordon's dividend growth model.... The cost of equity herein has been calculated as: Ke = Rf + β * (Rm – Rf) and Stock Valuation can be largely categorised as absolute valuation model and relative valuation model....
8 Pages (2000 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us