VALUATION PRINCIPLES OVERVIEW
Here you will learn the principles of valuation, primarily the basis of stocks valuations. There are two important terminologies that you must be aware of
- Enterprise Value - It is the value of the total firm of the company
- Equity Value - It is the value of the shareholder's equity of the firm.
Please note that in stock valuation, we are interested in finding out the equity value of the firm
It is also important for you to understand what is market capitalization and its differences from enterprise value and equity value. Both are a bit different and you must know why it is so?
Enterprise value (EV) is one the most important valuation principle and it means the theoretical price an acquirer might pay for another firm.
The sum total of the values that the shareholders have made available for the business is known as Equity Value.
Market Capitalization is an important concept to the investors who are looking for investing in company shares.
Market Cap vs Enterprise Value
Market Cap is the market value of a company’s stock, whereas Enterprise Value is a more comprehensive and an alternative approach to measure a company’s total value.
Book Value Vs Market Value
Book value is the value of an asset reported in the balance sheet of the company, whereas Market value is specify the current market value of any company or any asset.
Value vs Growth Stocks
Value Stocks is the stocks that are undervalued for a reason. Growth stocks are stocks that can outperform any other stocks of competitors.