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Stock Valuation Method is Important for Determining Investment

The stock valuation method consists of several ways to be able to value a company. One of the assessments is net profit.

In addition, the assessment is also based on income, book value, and cash in the financial statements. For investors in providing capital, of course, is not just like that.

However, there are several considerations that investors should pay attention to beforehand. Price is one that is quite influential on investment decisions.

In addition, investors need to do an analysis to be able to determine the projected value of the company.

This analysis is known as valuation. The stock valuation method is a process that can determine whether the stock price is good or not. Make sure the stock price is still in accordance with its intrinsic value.

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Investor’s Stock Valuation Method Use

An investor must be able to accurately assess the stock price of a company. This is so that the capital invested by investors can be matched.

Valuation value connects the financial health of a company. There are several indicators that investors use in the assessment.

From this value, investors will more easily determine whether the stock price is reasonable, too high, or too low. There are several ratios that investors can use to calculate stock valuations.

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P/B ratio

As in the previous explanation, there are several methods of stock valuation in knowing the price. The P/B ratio is the share value of one.

This means that the shares traded are in accordance with the book value of the company.

This ratio divides the stock price by the book value of the company. The value can be calculated from the difference between the company’s assets and liabilities.

If the P/B ratio is below one, investors should consider it a good stock undervalued. Meanwhile, if the ratio is more than one, the share price is higher than the book value of the company.

P/E Ratio

In calculating the stock valuation method through the P/E ratio, it is enough to divide the current share price with the total earnings per share. The value of earnings per share is assessed for the last 12 months.

If the value goes up and the price is constant then the P/E ratio goes down. So the stock has value undervalued.

Meanwhile, if the P/E ratio is higher, it indicates the company’s stock price overvalued. However, this condition is not absolute.

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P/S Ratio

The P/S ratio calculates a company’s valuation based on revenue. This figure is able to conclude the rupiah value that investors have to pay per sale.

The calculation formula is the market capitalization value divided by the total sales for the last 12 months. In addition, it can also be done by dividing the price by selling per share.

If the value of the high P/S ratio is in the category overvalued. Meanwhile, if the stock is considered to have a low P/S ratio, the stock is valued undervalued.

Actually, there are still several ratios that you can use as a stock valuation method. In this way, investors will find it much easier to determine whether or not to invest in a particular company. (R10/HR-Online)

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