As one wise man one said, people know the prices of everything and the value of nothing. I will not tell you who it was (despite the fact that I know it perfectly) and if it will be very interesting for you, you may find out by yourself. As for now I would like to concentrate on value and the price. In the reality value and price are two different meanings. Value have to be neutral and fair, while the price says nothing, because somebody may try to sell you something at price higher five time than it is really worth.
But who can say how much is it really worth. How to determine that real fair market value. For that many stock valuation methods are used. The are many valuation methods, but there are three main methods: relative valuation, DCF valuation and cost regeneration method. The first two are most used in practice and the most reasonable when there is a need to determine the value of some asset.
Theoretically any asset that have any worth can be an object of valuation. Mostly such objects stocks, real estate, bonds, other projects or businesses, cars or other movable assets. In reality, value can be determined for any asset or investment that can bring any income now or in the future.
But who can say how much is it really worth. How to determine that real fair market value. For that many stock valuation methods are used. The are many valuation methods, but there are three main methods: relative valuation, DCF valuation and cost regeneration method. The first two are most used in practice and the most reasonable when there is a need to determine the value of some asset.
Theoretically any asset that have any worth can be an object of valuation. Mostly such objects stocks, real estate, bonds, other projects or businesses, cars or other movable assets. In reality, value can be determined for any asset or investment that can bring any income now or in the future.
- Relative valuation method is easy to use because because all is needed is to find some other objects for comparison. And the values of those objects should be compared. Because of comparison this valuation method can be called comparison method too, but basically is called as relative valuation.
- DCF valuation method is the next popular method and the first popular among finance professionals. DCF valuation is based on discounted cash flow and can be called discounted cash flow valuation method. This method is more difficult and requires more knowledge and experience to use. But results are also more professional.