Stock Valuation

Stock prices are determined by the same principles that govern the values of baseball cards, antiques, works of art, and all products and services that are bought and sold: the laws of supply and demand. Every public company offers a set number of shares, and the public demand for ownership of these businesses, which is manifested in the number shares the public is willing to purchase and at what cost, sets the stock prices.

Current equities prices really are that superficial. Hence, short-term stock prices are incredibly volatile and highly unpredictable. Stock valuation is the science–some actually consider it an art–of determining the intrinsic value of equities, or what company stock prices should be based on fundamental strengths and weaknesses.

Investment geniuses like Warren Buffet have made themselves rich by seeing past the smoke and mirrors that are the day-to-day movement of stock prices. Eventually, poor companies, regardless of how “hot” they presently are, will either go out of business or see their stock prices plummet after announcing disappointing earnings quarter after quarter. Conversely, the stocks of strong businesses that are positioned for future growth but are underrated by the public will eventually rise in value.

As public opinion wavers, the stock prices of even the strongest companies will fluctuate. Sticking with fundamentally strong companies despite inconsistencies in their stock prices requires a high level of confidence in your stock valuation techniques, which is why we at Analytic Research LLC have developed ValueSheet. This Excel workbook template, loaded with financial formulas and conditional formatting, can download the key financials of any company within seconds, providing you with the same ratios and financial data used by the most successful value investors in the world.

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