Valuation for all of the rest of us!

To value someting, in financial terms, is going to be quite a task for most of us. Sure you can go on the web and get forecasting models and divde the firms value by share outstanding but that takes so much effort. The best way for the individual investor to decide which securities they are willing to buy outside of the ETF or mutal fund they already own is to look at the vitality of the company. Listed below is a simple value model found online.

http://www.moneychimp.com/articles/finworks/fmvaluation.htm

You may wonder what else could help you make a decision for picking a stock. There are several things that can indicate what you may expect from a security.
- The P/E ratio often times will indicate what kind of price movements you may expect from the stock you like. The P/E is often an indicator of how wild of a price change you may expect because it is linked to the the price earnings expectations of investors. Thus, if announced earnings are a disappointment on, say, Apple (NasDaq:AAPL) then one may see a stock value plummet by a few percentage points because investor confidence has decreased.
- A high P/E is considered a growth stock. A low P/E is considered a value stock. Historically value stocks out perform growth stocks.

While this is only a small piece of you valuation pie, this is the start to a long series of valuation tips that can help you, the normal investor, sort through all of the financial crap!