What this unit covers
Learn a simple way to estimate what a business is worth, using a real formula and a worked example, without needing a finance degree.
By the end you will be able to
- Explain why market price and a reasoned value estimate are not the same number.
- Calculate a rough value estimate from earnings per share and a multiple.
- Compare a value estimate against the market price to judge if a share looks cheap or expensive.
How it starts: Two Views on One Price
- You watch a stock trading at 210 rupees a share on your screen.
- One person calls it cheap while another calls it expensive at that price.
- Both looked at the same number, so who has actually reasoned this out?
Words you will meet
- Multiple
- A number showing how many times earnings buyers are willing to pay for a share.
In this module: Valuation Without Fear
- Why Price Isn't Value
- Intrinsic Value Simplified (this unit)
- Margin of Safety
- When to Buy & When to Wait
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