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QuestionsCategory: Valuation QuadrantValuation – intrinsic value

Hi,

Supposed I’m valuing a property stock and am using P/B ratio. May I know how do I compute the intrinsic value of this stock so as to decide when to make the purchase?

Just realised that PE ratio valuation can lead to an intrinsic value of a stock (using average PE multiply by EPS), but the other ratios don’t seem to work the same way?

Victor Chng answered 5 years ago

Hi Wong,

For PB ratio, you can also do the same thing. For instance if the company book value per share is \$1 and their average PB ratio range is 1.2x. The intrinsic value will be \$1.2 (\$1 x 1.2).

Wong replied 5 years ago

So means we can also calculate intrinsic value this way for PEG, POCF and PSR? Also, do i need to include adjustments for net cash/debt per share before arriving at the intrinsic value?

And for PB, how to get average PB figures?

Victor Chng replied 5 years ago

You can do that for the POCF and PS but not the PEG. Yes you have to adjust the net cash/debt to arrive for the intrinsic value for PE and POCF. For PB or PS please do not include the adjust net cash/debt for IV.

You have to plot the PB chart by downloading the share price from yahoo finance and input the book value per share in excel for the daily share price. From there you can plot out the PB chart and find the average.

Wong replied 5 years ago

Thank you so much for your fast reply on a Sat night. But could you explain why no need adjustment net cash/debt for PB and PS? For this, please take your time to reply. ;)

Victor Chng replied 5 years ago

Hi Wong, for PB ratio the cash and debt are account in the book value already, so no need to include again. As for PS is usually for cyclical or loss making companies hence to be conservative we do not add into it but if you want to include it is possible too.

Wong replied 5 years ago

I see.. Thanks so much, Victor.

Victor Chng replied 5 years ago

welcome :)

Sanjay Mishra replied 4 years ago

could you please refer me a video which explains intrinsic value. I am not able to understand it . thanks

Victor Chng replied 4 years ago

Hi Sanjay, you can understand the intrinsic value from this video https://investmentquadrant.com/the-valuation-quadrant/

Sanjay Mishra replied 4 years ago

Thank you Victor

Victor Chng replied 4 years ago

welcome :)