How Can I Determine The Value of a Stock at Purchase?
Stock valuation is more than market price. The purchase price of the stock is not always a good assessment of the true value of that stock. Many conditions can inflate or deflate the stock price, causing fluctuations that have nothing to do with the actual value of the company’s holdings, or growth potential. One method of valuing a stock is to look at the price-to-book ratio. The P/B ratio is a way of comparing the stock’s price at purchase to the value of each company’s share based on the book value of its assets. By examining the P/B ratio you can determine if the stock is undervalued or overvalued, based on the purchase price, compared to what the stock would be worth if the company was dissolved. Note the price of the stock at purchase. Find the stock’s current book value per share. Determine the book value per share by subtracting a company’s liabilities from its total assets, as of its last quarterly reports. Subtract a company’s intangible assets, non-monetary assets whose valu
