hi victor, thanks for today’s workshop.

some of the parts were a little too fast for me to absorb so here is my question.

may i confirm if the calculation for the intrinsic value of a stock is as follows?

Intrinsic Value = (EPS of stock) x (Mean Value of it’s historical PE range, i.e. the ‘horizontal line’ plotted on a PE chart)

may i know if is this correct?

thanks,

edmund toh

Hi Edmund,

Yes you are right. If you are still unclear, you can go through the online module below.

https://investmentquadrant.com/the-valuation-quadrant/price-earnings-ratio/

Thanks, victor. Much appreciated.

Welcome :)

is there another method to find instrinsic value? you mentioned some companies arent accurate to use PE ratio

is there another method to find instrinsic value? you mentioned some companies arent accurate to use PE ratio

You can also look at Price-to-Book, Price-to-Cashflow ratios depending on your use case.

Hope it helps.

Hi Jieren, how to calculate with PB? We find the 10 year average of PE and then multiply by the latest book value per share?

Hi James,

You can plot the PB chart using the same method for PE chart.

Thanks JR.

so to find intrinsic value you take the current EPS of latest quarter to multiply by the average PE?

Yes, take the current TTM EPS multiply by average PE

Hi James,

There is no need to adjust the close price if the company have convertible warrants. you just need to take diluted EPS or BVPS as it has account for conversion.

so the only instance we use the adjusted close price is when there is a split share? what about bonus share issue? say for example 1 bonus share per 4 share

Hi James,

You can just use the close price instead of the adjusted close price. I recently realised that close price have accounted for split and bonus already.

so when is the instance we use adjusted close price?

Hi James,

There is no need to use adjusted close as mentioned above the close price have take into account of split.

does it mean to say if the intrinsic share price is lower than the trading share price we should not enter position?

I would see it like buying something, you can buy at whatever prices, but it is always a good deal when it is sold at a discount. But bear in mind that not everyone goes on discount often. So it is a balance.

In most cases, I always look to buy either at fair or undervalued.

what should we do when the earnings are reported in for eg RMB but the share price was traded in SGD? how do we adjust the number to do the calculation?

Hi James,

You have to convert the yearly earnings from RMB to SGD and use the SGD share price to plot the chart.

Hi,

So it means i take the share price of eg for 1st Jan 2021 and the book value 2020 to calcuate the PB ratio?

Please login or Register to submit your answer