Valuation for Beginners: 3 SECRET Steps To Find the Next Top-Performing Stock (no Excel needed!)

Valuation for Beginners: 3 Steps to Find the Next Top-Performing Stock (no Excel needed!)

You will learn how you can value any stock by following just three simple steps. In fact, the valuation technique that I will share with you today is certainly much simpler than a complex DCF valuation model, so a discounted cash flow approach. All you need for today’s valuation method is basically a pen, a paper and some basic maths, and of course a good understanding of the company itself.

There are all sorts of valuation techniques that investors can rely on. There are relative valuation approaches that can further be subdivided into relative valuation approaches that compare a company’s price to that of peers, so similar companies / stocks operating in the same industry. But you can also value a stock on a relative basis by comparing its current valuation multiple to valuation multiples the very same company was trading at in the past.

Absolute valuation, on the other hand, evaluates the “true” value of a company without comparing it to the valuation of peers. An investor favorite here is the so-called discounted cash flow model, or in short DCF. Warren Buffett himself, for example, supposedly uses a DCF to calculate the intrinsic value of companies he invests in. You’ve also got probabilistic valuation techniques and literally hundreds of different valuation multiples you could use to value businesses – for instance, price-to-sales, price-to-gross-profit, price-to-operating income, price-to-free-cash-flow, enterprise-value-to-FCF, enterprise value to book value.

All of these valuation methods have their advantages and disadvantages, but one major point of criticism of more complex techniques like a DCF model is that they are so complex, that your intrinsic value estimate will most certainly be wrong. So if you place too much emphasis on this intrinsic value estimate you get out of a DCF, this can lead to costly investing mistakes.

So an alternative is a stock valuation model for beginners (valuation for beginners) that allows you to easily value any business and I will step-by-step walk you through this valuation approach and explain everything you need to know - this stock valuation is really easy and I hope easily explained.

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○ Nerd Wallet Compound Interest Calculator: https://www.nerdwallet.com/banking/calculator/compound-interest-calculator

MUSIC:
○ https://www.epidemicsound.com/track/Au7huVdnSA/

Chapters:
0:00 Intro
0:46 Relative Valuation
1:20 Absolute valuation
2:09 Flaws of DCF valuation?
2:54 What’s the alternative?
3:40 Step 1
4:37 Understanding a business?
5:35 Historical growth
7:00 Future revenue calculation
7:45 Step 2
8:36 Wix variable costs
10:50 How to predict margins (part 2)
11:45 Future cash flow calculation
12.17 Step 3
12:52 Recurring revenues
13:37 Step 4: Final Equation
14:14 Calculating IRR
16:00 Adding some nuance

DISCLAIMER:
The content provided on this channel should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. The stocks and funds discussed on this channel are examples only and may not be appropriate for your individual circumstances.

Before making any financial or investment decisions, I recommend you consult a financial planner or advisor to take into account your personal investment objectives, financial situation, and individual needs.

In no event shall René Sellmann be liable to any viewer for any damages of any kind arising out of the use of any content published on this channel, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages.

I hope you enjoyed the content!