Value

Benjamin Graham: The Father of Value Investing

Benjamin Graham (1894 – 1976) was an American economist and a professional investor and is considered the “father of value investing”. Graham developed a track record of earning solid returns in the stock market for himself and his clients and for doing so without taking enormous risks. He began teaching this investment [...]

Separating Value Stocks from Value Traps

A Value Trap stock is a stock that has had a dramatic price drop and may be falsely perceived to be a value stock. While a stock that is trading a low price/earnings (P/E) ratio or some other low valuation measure might be at that price level for good reason, investors may be drawn [...]

Using the Price-Earnings Ratio to Assess Stock Value

The Price-Earnings Ratio is a valuation ratio to measure a company’s current share price against its earnings per-share. Often referred to as the “multiple”, the measure indicates how much investors are paying for each dollar of the company’s earnings. Generally speaking, a high P/E indicates that investors expect the company to achieve higher earnings [...]

Choosing a Discount Rate for
Discounted Cash Flow Stock Valuation

The discount rate is an interest rate used to determine how much future cash flows are worth today. Discount rates are used in valuation analysis when cash flows are expected to be received over long periods of time. The discount rate is expressed as an annual percentage and is one of the critical components [...]

Book Value Per Share and Value Investing

Investors often want to know the book value of a common stock to understand what they would receive as payment for each share with regard to the worth that is shown on the company balance sheet. In cases where a company is being liquidated, the book value is used at to pay off company shareholders. [...]

Earnings Yield and Value Investing

The Earnings Yield is the ratio of a company’s last twelve months of earnings per share to its stock price. The result is an estimate of how much in earnings stockholders can expect to receive for each dollar paid for the stock. The earnings yield is the inverse of the Price/Earnings (P/E) ratio and [...]

Value Investing and a Margin of Safety

Investing with a margin of safety is a principle conceived of by Benjamin Graham, who is considered by many to be the “father of value investing“. Under this principle, the investor looks to purchase when the actual or “intrinsic” value of the stock is believed to be significantly above the market price. The [...]

The Price/Earnings (P/E) Ratio: Definition and Use

The P/E ratio (price-to-earnings ratio) measures the price of a share relative to company earnings company earnings on a per share basis. A higher P/E ratio indicates a willingness by investors to pay more for a unit of income. The measure is most valuable when viewed over time for the emergence of a trend. [...]

Finding Good Stocks to Buy-
Five Things to Look For

Stock market investors are trying to find good stocks to buy before the other stock market investors find them. Given the laws of supply and demand that apply to the stock market, which is a very efficient market, you want to buy “undervalued” stocks. Ideally, the demand for these [...]

The Stock Beta Measure and Value Investing

Value investing is an investment style which “favors good stocks at great prices over great stocks at good prices”. The approach is based on the principle that stocks are not always priced efficiently. With this in mind, value investors seek to acquire stocks that are currently trading at less than their perceived (“intrinsic”) [...]