It is often said that every stock has a high or low valuation. How is it calculated? Is there a formula?

Your question is too complicated. There are formulas, but even if you write them, you can't understand them without any financial knowledge.

There are many valuation methods, mainly financial valuation, that is, static enterprise value written in financial statements. The second is the cash flow discount method, which is the most commonly used method. The third is the option valuation method, which is mainly used to evaluate enterprises in the construction period and assets that have not yet produced benefits. This method is widely used in mathematics and requires knowledge of calculus, but I feel that the more complicated the method, the worse the effect. Although I admire the person who invented this valuation method, I feel it is of little use. So I can only give you a brief introduction to the most widely used and effective valuation method-cash flow discount method. There are several cash flow discount methods, and I can only introduce one of them. The scientific name is Capital discounted cash flow method Law. Of course, other methods and ideas are similar. I mainly use this method now.

Cash flow refers to the actual cash available in the currency earned by an enterprise in one year. Because although the enterprise makes money, only this part of the money can be truly distributed to shareholders.

The second step is to consider the investment cycle. This is the stock you intend to hold for at least a few years. Commonly used abroad is 8 to 10 years. According to my experience, it is best for the domestic A-share market to have a five-year cycle, because domestic enterprises are too unstable. Then estimate the cash flow from the first year to the fifth year according to your understanding of the company and statistical laws.

The third step is to consider the discount rate. The reason why shareholders invest their money in enterprises is because they definitely earn more money than risk-free investments such as national debt. On the other hand, shareholders' investment has to bear certain risks, so it is not enough to just exceed the income of national debt, but also to pay more in return for taking risks. Therefore, shareholders invest because the company's income exceeds the sum of risk-free income and risk reward. Assume that the national debt income is 5% per year and the risk reward accepted by shareholders is 3%, and the sum of them is 8%. The company's profit must exceed 8% before anyone is willing to invest.

The fourth step is to divide the annual cash flow calculated in the second step by the discount rate. Suppose the first year's cash flow is 1 15 yuan, then divided by 108%, the second year by 125 yuan, and then divided by the quadratic of 108%, and the third year by 108%. If the fourth year is 140 yuan, it is divided by the fourth power of 108%, and if the fifth year is 145 yuan, it is divided by the fifth power of 145. The sum of these five calculation results is equal to the sum of five years.

The fifth step is to consider the residual value. The so-called surplus value means that enterprises must have a large number of assets by the fifth year, such as machinery and equipment, factories, inventories, working capital, etc. These assets are also valuable. If you subtract the approximate liabilities from this value, you will get the net assets. If you divide this net asset by the fifth power of 108%, you will get the discounted value of the net asset, which is the residual value.

The sixth step is to add the surplus value and the cash flow created in five years to get the total value created by the enterprise in five years. Divide this total value by the total share capital to get the net assets per share. If the current share price is higher than this value, the value will be overvalued and you can't buy it. Below this value, it is underestimated and you can buy boldly.

That's probably what it means. I wonder if you can understand it? If you want to introduce this method in detail, you must write a book. I don't have time to write such a long speech, and no one reads it. Shareholders want to get rich quickly, who has leisure to study these brain-circling things.

These valuation methods are not as powerful as they seem. Look at the valuation of enterprises made by famous scary institutions in previous years. It's so wrong that it's completely irrelevant. My own experience is that these valuation methods are only a little better than gambling and almost as mysterious as fortune telling.

In order to improve the accuracy of valuation, we must first study all aspects of the company's operation, even how the chairman takes a shit. Secondly, we should try to choose traditional companies with stable operating conditions, which is also the reason why Buffett likes to buy companies with poor soil, because those whimsical high-tech companies are too unstable. Finally, this simple valuation calculation is made. This calculation only quantifies the previous qualitative research, and the basic basis is the understanding of the company.

In addition, even if your valuation is correct and you buy at an undervalued price, you still have to bear the price downturn for a long time. Because although underestimated, it may be underestimated for several years. Unless you want to invest in value, it will be very painful to speculate in stocks in this way. The stocks I bought when I underestimated last year didn't rise as much as the new investors, but I won't sell any stocks for five years unless there is a crazy bull market.

By these methods, almost all the stocks below 2 100 last year were seriously undervalued. At that time, we should sell houses, land and stocks. I wonder if you bought it? Up to now, almost all companies in the small and medium-sized board are overvalued, so I have money in my hand, but I don't buy a penny. What if I step empty? Then I'd rather step on the air than take any risks.

Good luck with your investment!