How to Apply the Business Finance Concept of Value Investing
Value Investing is a business finance concept that states you should invest in stocks with the lowest market price per share. This means that you are investing in companies where the company’s stock is currently trading below its intrinsic value. Value investors believe that they can uncover undervalued stocks by looking at a company’s balance sheet, income statement, and cash flow statements to figure out what their true worth is. In this blog post, we will discuss how to apply the principles of Value Investing when evaluating your investments so you can improve your return on investment!
Your return on investment (ROI) is the percentage you receive from your original investment. For example, if an investor invests $100 and receives a profit of $200, her ROI would be 100% – this means that for every dollar invested she received two back! This might sound pretty great but we should also take into consideration how much the investor had to risk. For example, if an investor invests $100 and receives a profit of only $50, he has still received a 50% return on investment but it is less than his initial investment which means that this was not as good of an ROI compared to the first example.
Value Investing follows very similar strategies when determining how much you should expect your investments to pay off for you – we want the lowest possible price per share! This way we are investing in companies where their stock currently trades below its intrinsic value (the actual worth or potential future earnings). Intrinsic value can be determined by comparing current assets against liabilities and then using these numbers along with historical data such as revenue growth rates and market trends to determine the company’s worth.
Investors who use this method can apply it to their own investments by first looking at all of your investment choices and then deciding which one has the lowest market price per share – you should invest in that option! If you want more information on how to estimate a stock’s intrinsic value, check out our blog post How Do You Determine an Investment’s Intrinsic Value? for some helpful tips. Keep in mind though, those numbers are just guidelines so if you feel like something is wrong with them go ahead and do what feels right and hope for the best because as we know: no risk, no reward!
Value Investing is a business finance concept that states you should invest in stocks with the lowest market price per share. This means that you are investing in companies where the company’s stock is currently trading below its intrinsic value. Value investors believe that they can uncover undervalued stocks by looking at a company’s balance…