How to use indicators for effective valuation

Three commonly used valuation standards:

1. Dividend benchmark model

For investors who want to get cash flow income from investment, it is especially useful to evaluate the stock value based on dividend rate. A simplified calculation formula can be used: stock price = expected dividend in the next year/rate of return required by investors. For example, HSBC expects a dividend of US$ 0.32 (about HK$ 2.50) this year, and investors expect an annual return on capital of 5.5%. Other factors being equal, HSBC's target price should be RMB 45.50.

2. The standard profit ratio widely used by investors is the price-earnings ratio (PE)

Its formula: P/E ratio = share price/earnings per share. Using P/E ratio has the following advantages: simple calculation and easy data collection. There are related materials in economic newspapers every day, which are called historical P/E ratio or static P/E ratio. However, it should be noted that in order to reflect the future trend of stock prices more accurately, the expected P/E ratio should be used, that is, the expected return should be substituted into the formula.

What investors should pay attention to is that the P/E ratio is a relative indicator reflecting the market's profit expectation of the company. P/E ratio should be used from two relative angles, one is the relative change between the expected P/E ratio of the company and the historical P/E ratio, and the other is the comparison between the company's P/E ratio and the industry average P/E ratio. If a company's P/E ratio is higher than the previous year's P/E ratio or the industry average P/E ratio, it means that the market expects the company's future earnings to rise; On the other hand, if the P/E ratio is lower than the industry average, it means that the market expects the company's future profit to be lower than that of its peers. Therefore, the price-earnings ratio should be relative, not that the high price-earnings ratio is not good, but that the low price-earnings ratio is good. If a company's profit is expected to rise in the future and its stock price-earnings ratio is lower than the industry average, then its stock price will have a chance to rise in the future.

3. P/B ratio (PB), that is, P/B ratio.

The formula is: P/B ratio = share price/net asset value per share. This ratio is the basis for estimating the company's share price from the perspective of the company's asset value. It is more appropriate to analyze the valuation of stocks of banks, insurance companies and other companies, whose assets and liabilities are mostly composed of monetary assets.

In addition to the most commonly used valuation criteria, the valuation criteria also include the ratio of cash discount rate, P/E ratio and earnings per share growth rate (PEG). Some investors like to measure an enterprise with return on net assets or return on assets.

These can be understood gradually, and investors had better have some preliminary understanding of the stock market before entering the stock market. At the beginning, you can use A Niu Stock Treasure to simulate stock trading. There are some basic knowledge materials of stocks worth learning, and you can also establish your own mature knowledge and experience of stock trading through the above related knowledge. I hope I can help you, and I wish you a happy investment!