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What are advantages and disadvantages of stock valuation models you have learned in this chapter?

What are advantages and disadvantages of stock valuation models you have learned in this chapter?

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Answer #1

Stock valuation determines the intrinsic value of a stock and the intrinsic value determines the whether the stock is undervalued or overvalued its current market price.

Stock valuation models are two categories:

  1. Absolute
  1. Discounted Dividend Models
  2. Discounted Free cash flow Models
  3. Discounted Residual Individual Models
  4. Discounted Asset Models
  1. Relative Valuation Models
  1. P/E ratio
  2. P/S ratio
  3. Enterprise value
  4. Operating Margin

Advantages of stock valuation:

While investing in stocks, you must know the stock is undervalued or overvalued or whether to know buy or sell the stock.

Disadvantages of stock valuation:

Different models are available for stock valuation but difficult to find which method is to give absolute result on stock valuation.

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