How Do You Determine The Value A Stock From A Companys Financial Statements?
Determining the value of a stock is an important process. A proper valuation can determine the attractiveness of a particular investment opportunity. This technique is more a back-of-the-envelope type methodology. More detailed methods can yield better results, but this probably the most accurate way to accurately determine the value of a stock. These items can be picked off the company financial statements. First, estimate next year’s revenue based on last years revenue and the revenue growth rate of the last few years. For example, if you expect revenue to grow 10%, Rev_next_yr = Rev_last_yr * 1.10 Estimate the net margin based on last few years and any trends. Probably should be about the same as on the report. Net income (earnings) is net margin multiplied by revenue. Estimate number of shares outstanding based on historical data and any trends. You would think this would be constant, but it rarely is due to stock options, share buybacks, etc. Earnings Per Share (EPS) is net income
