Stock valuation is a relatively complicated process, which is influenced by many factors and there is no global unified standard. There are many methods to evaluate stocks, and there are three commonly used methods according to different angles such as investors' expected returns, enterprise profitability or enterprise asset value.

Stock valuation is divided into absolute valuation, relative valuation and joint valuation.

Absolute valuation

Absolute valuation is to obtain the intrinsic value of listed companies' stocks through the analysis of their history and current fundamentals and the prediction of financial data reflecting their future operating conditions.

Absolute valuation method

One is the discounted cash flow pricing model, and the other is the B-S option pricing model (mainly used for option pricing, warrant pricing, etc. At present, DDM and DCF are the most widely used pricing models in discounted cash flow method, and FCFE equity free cash flow model is the most widely used DCF valuation model.

The role of absolute valuation

Stock prices always fluctuate around the intrinsic value of stocks. It is found that undervalued stocks are bought when the stock price is much lower than the intrinsic value, and sold for profit when the stock price returns to the intrinsic value or even higher than the intrinsic value.

When studying listed companies, we often hear the word valuation, which is actually about how to judge the value of a company and compare it with its current share price, so as to judge whether the share price deviates from the value and then guide investment.