Professional Documents
Culture Documents
of Basic Stock
Valuation
A Basic Value Investing
Guide for the Beginner
Investor in the Philippine
Stock Market
Page 1
2 The Tiny Book of Basic Stock Valuation
Table of Contents
Introduction .................................................4
Why Should You Read This Book .......................6
What is Value Investing ...................................7
How to Value a Business ................................ 10
Knowing How a Business Works ................... 10
Determining the Right Price ........................ 15
The Stock Price and Its Relation to the Companys
Value .................................................... 17
How to Value Stocks Using the Price to Earnings
Valuation Method ........................................ 20
Finding the Intrinsic Value........................... 21
What is a Discount Rate ............................. 22
Using a Margin of Safety ............................. 24
How to Value a Stock Using Return on Equity
Valuation Method ........................................ 26
What is Return on Equity............................ 26
Using Return on Equity to Value a Stock ......... 28
Copyright www.investingengineer.com
All Rights Reserved 2016
3 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
4 The Tiny Book of Basic Stock Valuation
Introduction
Hi! Im Mark, an Electrical Engineer by profession
and the creator of the Philippine Value Investing Blog
www.investingengineer.com!
Copyright www.investingengineer.com
All Rights Reserved 2016
5 The Tiny Book of Basic Stock Valuation
Happy investing!
Mark
The Investing Engineer PH
www.investingengineer.com
Copyright www.investingengineer.com
All Rights Reserved 2016
6 The Tiny Book of Basic Stock Valuation
I hope that youll learn a lot from this book and I hope
that this book will serve you well.
Copyright www.investingengineer.com
All Rights Reserved 2016
7 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
8 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
9 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
10 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
11 The Tiny Book of Basic Stock Valuation
Cash - P5,000
Halo-Halo Stand - P65,000
Refrigerator - P20,000
Inventories - P10,000
Total Assets - P100,000
Copyright www.investingengineer.com
All Rights Reserved 2016
13 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
14 The Tiny Book of Basic Stock Valuation
Cash - P15,000
Halo-Halo Stand - P65,000
Refrigerator - P20,000
Inventories - P10,000
Total Assets - P110,000
Copyright www.investingengineer.com
All Rights Reserved 2016
15 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
16 The Tiny Book of Basic Stock Valuation
Now what does this tells us? If you overpay for the
business, your returns diminishes, risk of losing
money becomes higher and it will take you a longer
Copyright www.investingengineer.com
All Rights Reserved 2016
17 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
19 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
20 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
21 The Tiny Book of Basic Stock Valuation
Now that we have all the data, the formula to find the
future value (FV) of the stock is;
Copyright www.investingengineer.com
All Rights Reserved 2016
23 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
24 The Tiny Book of Basic Stock Valuation
Calculating, we get;
Copyright www.investingengineer.com
All Rights Reserved 2016
25 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
26 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
28 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
31 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
32 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
33 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
35 The Tiny Book of Basic Stock Valuation
My Final Message
Ive explained in this book the definition of what
Value Investing is all about and how you can value
stocks using two basic methods; the P/E Ratio model
and the Return on Equity model. Ive also discussed
briefly how Warren Buffett finds companies worthy
to invest by looking at a companys Durable
Competitive Advantage.
Thank you for the time reading this book. If you like
it, please share it to people who you think will benefit
from it.
Happy investing!
Copyright www.investingengineer.com
All Rights Reserved 2016
36 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
37 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
38 The Tiny Book of Basic Stock Valuation
Glossary of Terms
Note: All definitions are taken from www.investopedia.com. I give
the site credit where credit is due.
Copyright www.investingengineer.com
All Rights Reserved 2016
39 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
40 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
41 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
42 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
43 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
44 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
45 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
46 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
47 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
48 The Tiny Book of Basic Stock Valuation
Visit www.investingengineer.com
and be sure to subscribe to the
blog to keep updated of new
posts straight to your inbox.
Copyright www.investingengineer.com
All Rights Reserved 2016
49 The Tiny Book of Basic Stock Valuation
Ebook Disclaimer
(1) Introduction
(2) No advice
Copyright www.investingengineer.com
All Rights Reserved 2016
50 The Tiny Book of Basic Stock Valuation
Copyright www.investingengineer.com
All Rights Reserved 2016
51 The Tiny Book of Basic Stock Valuation
(5) Exceptions
(6) Severability
Copyright www.investingengineer.com
All Rights Reserved 2016