Proper stock potential prediction -direct guarantee of their profitability. If there is no confidence in their own assessment skills, then this should be entrusted to professional market participants. Their experience and knowledge will help to properly invest and increase funds.
Stock valuation methods: for investors and issuing parties
Analysis of the potential of securities is carried out atinvesting in businesses. From the correct assessment depends on the level of payback and dividends. The assessment reveals the investment potential of the company, the optimal time for buying and selling.
Basic concepts
The company issues shares to receiveadditional income from their sales. To this end, an evaluation of the shares. At the same time, their liquidity and the level of expected income depends on the prospects and growth rates of the enterprise. Most stocks do not have a specific expiration date. But the minimum period of validity must be at least one year. By default, they are valid as long as the issuing company conducts business.
Two types are distinguished: simple and privileged. Common shares have the following properties:
- After their purchase, the owner receives the right to participate in the meeting of shareholders, to vote for certain decisions.
- Share payments are made after payments are made on preferred shares.
- Between themselves, ordinary shares are divided into classes A and B. The first type has advantages in the order of payments.
Factors Influencing Costing
Valuation of shares depends on such leading factorsboth supply and demand. The best is the price that buyers are willing to pay. However, this method may not be objective. The reason for this are other, external factors.
По мнению специалистов, акции российских компаний in the securities market are sold at very low prices. The reason is political instability, lack of clarity of the prospects of individual industries and sanctions against the country. This leads to the fact that investors are in no hurry to invest. In assessing the value of shares, these factors are carefully analyzed.
Liquidity
Valuation of shares requires consideration of liquidity.currently and in the future. Under the liquidity should be understood the ability to implement them at any time. According to this criterion, shares are divided into three echelons.
- “Blue Chips” are the shares of leading companies,monopolists. They have a stable rating, good prospects, which excludes big risks. Most investors try to invest in blue chips.
- The second tier includes companies that havegood potential Professionals clearly see their perspectives. From a financial point of view, have positive projections. Despite the higher level of risk, such companies also have investment attractiveness.
- On the third tier are companies that have recently begun operations in the market. Their perspectives are unknown. Contributions are the most risky.
Thus, it should not be overlooked that market conditions are also one of the leading factors in valuing stocks.
Approaches in the evaluation
Despite the complexity of the theory of the stock market,experienced investors are able to calculate in advance the stock returns with mathematical precision. But at the same time, most novice investors are mistaken in investing, relying on stocks of companies that have been listed on the market for several years in a row. Here there is a need for a more detailed study of assessment methods, regardless of current conditions.
From this point of view, there are two types of assessment: technical and fundamental analysis.
Fundamental analysis
If you follow the principles of fundamentalanalysis, the investor needs to examine all available information about the company. All is exposed to the analysis: accounting reports, tax system, production technologies, material and technical base, planned projects of the company, position in the market. Not overlooked by the trend of the industry in which the company specializes, management strategies for innovations in the industry and not only. If based on the results of such an analysis, it turns out that the company has potential, then a decision is made to purchase shares.
Technical analysis
An important question is when to buy stocks.As mentioned above, stocks at the peak of relevance tend to decrease in prices. There is a need to calculate the exact time of purchases and sales. This will help technical analysis. It is carried out by studying the graph of growth in the popularity of the action. The optimal moment is the period when the value of shares decreases and approaches a certain point, in the language of stock market players with a support line.
When selling also should refer to the schedule. If the cost grows and approaches the peak, then the shares should be implemented.
But such a policy is more characteristic of market speculators. Regardless of the real potential of the shares, they sell them when there is demand, and buy them when the supply is relevant.
What evaluation methods are preferred?
Applied stock valuation methods depend onwhat is the purpose of the assessment. Here there are interests of two parties: the investor and the issuing company. The first one is interested in stock returns. The second side is interested in attracting additional funds not only in current activities, but also possibly in future projects.
In addition, stock valuation is conducted atrestructuring of the enterprise, when making transactions, to obtain a loan in a bank, to transfer a block of shares to third parties and mainly to demonstrate the prospects of the company.
In all cases, the valuation of the market value of shares is carried out by 5 methods. They are as follows:
- Nominal.The value of shares in this method must be equal to 25% of the share capital or less. At the same time for each share of the amount should be the same. The total amount of shares issued at a given price shall not exceed the amount of the share capital.
- Market Method.The cost of this method will differ from the previous coefficient. Here the landmark makes supply and demand. If the company is stable, then the valuation of the shares will give it profitable prospects. And vice versa, in case of unstable situation, the company shares are cheaper.
- Book value. The ratio will be known if we take the amount of net assets and divide by the number of shares. This method is applicable when there is a merger.
An interesting practical point:in the West, companies are ranked higher than their accounting figures. In Russia, the opposite is true - the leading factor is financial performance. This is due to the lack of information for the application of other methods.
- Valuation of shares by the liquidation method.Applies the residual principle. Dividends will be charged after the company sells assets at a bargain price, settles with counterparties and pays on preferred shares. Here the decisive factor for the profitability of shares is the liquidation amount of the company. It should be noted that the procedure for settlements with affiliated companies and persons is established by law. In this list, shareholders do not occupy the first role, which creates certain risks for the investor.
- Инвестиционный метод предполагает ориентир на the value that the investor considers optimal. But his assessment should not be unfounded. He must justify such a cost and present the results of the analysis and other arguments.
Which method to choose?
Valuation of the company's shares, in particular the methodvaluation depends on quotes in the market. If quotes are at or near the peak, then the weighted average amount at the valuation date should be calculated. In the opposite case, when stocks have low rates, it is much more difficult to evaluate. In such cases, it is not the valuation of the stock of the enterprise that is relevant, but the determination of the value of the entire enterprise.
It should be noted that these methods are not exhaustive. In addition, there are ways in which the main role played by financial performance.
The valuation of the value of the package of shares with such methods will be as follows:
- The calculation of the value of net assets in circulation.
- Analysis of the capital market.
- Discounting of financial flows.
- Mathematical weighting.
- Capitalization of income.
Practical application of methods
The liquidity cycle of stocks may vary fromseveral months to several years. In order not to remain at a loss from investing activities, you should bet on stocks with long periods. There are two compelling arguments:
- In the long run, less speculators are involved, courses can be predicted with higher accuracy.
- Thanks to stable growth, they bring more profit. From this point of view, some shareholders hold them for half a century.
How profitable to invest in stocks?
The investor is absolutely free in hispreferences, even if the valuation of a share package promises positive results. Among Russian investors are popular stocks of western emerging companies. This is due to their stability.
The same picture is in the west, only withorientation, on the contrary, - to Russia. It is believed that Russian companies bring more profit in the short term. This trend allows them to invest substantial amounts in domestic enterprises.
Given the fact that the stock market requiresdeep knowledge, practical experience and a lot of other conditions, some investors do not risk independently doing stock valuations. They transfer funds in trust or operate through special funds.
Stock management
By default, the purpose of buying stocks is clear -Receiving a profit. But one of the main laws of investing says - you should not invest all the money on the shares of one company. This approach is due to risks that do not depend on either the investor or the issuing company.
After the valuation of the company's shares has been made, the classic strategy is applied. Its main criteria are as follows:
- If the purpose of investment is the safety of funds, then you should rely on "blue chips". Their number is not limited. Optimally - from 3 to 5, depending on the total amount of investment.
- If the investor is willing to take risks for the sake of gettinghigher returns, you should look closer to stocks from the second and third echelon. The proportions are as follows: 50% - in blue chips, the remaining 50% should be distributed between the second and third echelons.
With this approach, the investor is insured against large losses: if the third echelon did not justify forecasts, then the second can compensate for the losses.
Conclusion
Securities market as a separate industryeconomy formed a long time ago. If earlier only certain persons had access to it with special training and in the relevant economic environment, then at present everyone has access. Information technology, Internet development and the availability of information help in this. Thanks to them, the market valuation of shares and further transactions with it are available even to novice investors.
The input amount to the investment market is not controlled by anyone. Depending on their own capabilities, each trader or investor has the right to risk any amount convenient for him.
