Comments on: Calculating Fair Value For a Stock – Rule Number One

By: geldpress

geldpress — Mon, 21 Nov 2011 16:17:14 +0000

It’s a matter of preference, your own risk tolerance, and your own level of comfort.

By: Papy

Papy — Sat, 29 Oct 2011 20:53:58 +0000

Hello,

“Phil Town recommends a default rate of 15% as the minimum return.”
How could I find or estimate the minimum acceptable rate of return for an investment?

Thanks

By: geldpress

geldpress — Thu, 15 Sep 2011 00:28:34 +0000

There are tons of calculators all over the Internet, but they do not always reveal their assumptions on how they calculate fair value. There are also an assortment of tools that just give a generic ranking of “good value” vs “bad value”. The best example is the Value Line publication, which is available for free in many libraries throughout the country.

By: Suyog

Suyog — Sun, 11 Sep 2011 22:24:51 +0000

Is there a automated calculator than can actually imply the above formulae and calculate the value of shares if I enter the name of the company.

By: software

software — Wed, 21 Apr 2010 00:15:40 +0000

Thanks for sharing the info. I found the information really helpful.

By: geldpress

geldpress — Tue, 06 Apr 2010 17:25:57 +0000

You are correct Rob. The Rule #1 valuation method is mainly for consistently profitable companies. For companies that are either consistently losing money (Amazon in their early years), or fluctuating between profitable and unprofitable (financial firms today and many technology companies), there are numerous other methods of valuations. The thing to remember is that valuation is very subjective and the methods (including rule #1) is only one such method.

By: Rob

Rob — Sun, 04 Apr 2010 09:54:30 +0000

An issue comes up when a company has had a loss per share, because how do you calculate the percentage change in EPS? Say a company loses $2 per share one year and earns $3 the next. The percentage change is (3 – -2)/-2, which equals -250%. Does that seem right? Some say to just ignore the negative number, but say instead that same company had a loss per share of $.50 in year one instead of $2. The percentage change would be (3 – -.5)/-.5, which ignoring the negative number, equals 700%. If growing from -$2 to $3 per share is 250%, how could growing from -$.50 to $3 per share be 700%? There’s no way around this issue, so the method explained here can only be used when there’s no losses per share.

By: Christian Maio

Christian Maio — Tue, 17 Nov 2009 23:13:51 +0000

I saw something similar to this on another website and couldn’t fully see the implications, but this post is much clearer. Thanks!

By: Lose Money With Free Bad Advice | Geldpress

Lose Money With Free Bad Advice | Geldpress — Wed, 14 Jan 2009 23:53:59 +0000

[...] company with good earnings potential, but the current valuation is ridiculously high, as I stated here. My personal strategy with McDonald’s is to patiently wait for the $50 or lower range to [...]