Financial Analysis. Lesson 18. Equity Valuation and Stock Analysis

Financial Analysis. Lesson 18. Equity Valuation and Stock Analysis

1. Equity valuation assesses a stock’s worth based on financial metrics.

2. Intrinsic value is the estimated true value of a stock.

3. Dividend discount model (DDM) values stock by projected future dividends.

4. Price-to-earnings ratio (P/E) compares stock price to earnings per share.

5. Earnings yield is the inverse of P/E, showing earnings per dollar invested.

6. Price-to-book ratio (P/B) compares stock price to book value per share.

7. Dividend yield measures the return on investment from dividends alone.

8. Free cash flow to equity (FCFE) calculates cash available to equity holders.

9. Residual income model values stock based on excess returns over equity cost.

10. PEG ratio divides P/E by earnings growth rate to assess valuation.

11. Enterprise value to EBITDA (EV/EBITDA) compares valuation across companies.

12. Relative valuation assesses a stock by comparing with similar companies.

13. Fundamental analysis evaluates stocks using financial statements and economic factors.

14. Technical analysis examines price trends and trading volume for stock decisions.

15. Moving average smooths price data to identify market trends.

16. Support level is the price level where a stock tends to stabilize.

17. Resistance level is the upper price limit where stock often halts.

18. Beta measures a stock’s volatility in comparison to market risk.

19. Alpha indicates performance beyond market expectations or benchmarks.

20. Dividend payout ratio shows the percentage of earnings paid as dividends.

---

Technical Examples:

1. DDM helps estimate intrinsic value based on anticipated dividend payments.

2. PEG ratio aids in evaluating if a stock is overvalued or undervalued.

3. EV/EBITDA provides a comparison metric for similar companies' valuations.