Difference between face value, book value and market value

cc @Greenbackd “Investing isn’t hard. Buy stocks below intrinsic value.” “How do you calculate intrinsic value?” “That’s hard.” — Dave Collum (@DavidBCollum) September 11, 2015 Had a hearty chuckle when I read this tweet that accurately summarizes my understanding of value investing. It’s all very well to say you only buy value but incredibly hard to be sure about what constitutes value. I retweeted it only to get a response that read “Leave alone intrinsic value, I’m not even clear about the difference between terms like face value, book value and market value!” I thought to myself, that one I can

Read more

Decoding the PE ratio of a stock

At a glance Price-Earnings or PE is the most widely valuation metric by equity market investors However, arbitrarily shifting PE levels and differences across industry groups mean it’s hard for an investor to utilize it in his decision-making The conservative interpretation of PE should be “the number of years of earnings it will take to pay back your cost of buying a share” Additionally, PE is an indicator of the market’s expectations of earnings growth over a sustained period of time. Working out that expected growth number provides an investor additional information on the suitability of a purchase Ask a

Read more