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Do you guys do discounted cash flow analysis when you're researching stocks?
The one thing I'm having trouble with, coming up with an answer or having insight, is the actual (estimated) valuation of a business. I have some ideas on how to find potential investments, but when it comes to actually deciding value, I have no idea how to come up with a figure. I could say, "I think this company is worth $500," but that is purely a guess with nothing to back up that claim
I`m pretty new myself but here is what I did:
1. I thought about the Industry I wanted to invest in and how the perspective of the Industry in my opinion is.
2. I created an Excelsheet listing the Top 3 companies of the Industry and the companies I wanted to invest in. Here I listed various Data:
P/E, P/S, P/B, Cash/Debt past earninggrowth etc.
I also look how the avg. opinion on the Stock is and how the past P/E-Ratio was(At what P/E people bought the Stock).
3. Reading trough the 10ks
How I decided to invest in my last Stocks:
I wanted to invest in the Biotechindustry, though I didn`t feel like buying a pharmacompany as the Variance there can be really high. So I decided that I´m going to buy a supplier(Specialty Chemicals).
I had in my excelsheet:
W.R. Grace, Hawkins, Brenntag, Sigma-Aldrich, Aceto and some other companies I can`t remember.
W.R. Grace was skyrocketing over the last years, though it was filing banktruptcy years ago and didn`t seem to be out of it. So I had no Idea how to valuate it and thus decided to stay out of it.
http://finance.yahoo.com/q?s=GRA&ql=0
Hawkins seemed quite solid overall, though it`s P/E seemed quite high compared to the others and overall I didn`t like their last quarterly Results I think(I can`t remember too good anymore). So I decided to stay out of it.
http://finance.yahoo.com/q?s=HWKN&ql=0
Sigma-Aldrich, I didn`t find anything that made me feel uncomfortable with that Stock. Everything seemed fine(P/E P/S etc all seemed quite low compared to the other companies in the industry). So I decided to buy it at 72(It`s at 80$ now, broke it`s all-time high).
http://finance.yahoo.com/q?s=SIAL&ql=0
Brenntag AG, it`s quite a while ago and the new Earnings are out and unfortunately I lost the excelsheet trough a crash of my Harddrive. But I`m quite sure that Brenntags PE was over 24 and I didn`t like the last quarterly Results. So I decided to stay out of it. It traded at around 130$ back then and the Earningsreport that just came out was negative and it fell to 118. I feel like it`s going to be a good buy soon again.
http://finance.yahoo.com/q?s=BNR.DE&ql=0
Aceto, I looked for every company in that Industry and stumbled across this smaller one. It has quite the low Marketcap, though I felt the Financials were really solid and it was quite undervalued. It seemed like a small gamble but I felt like it`s going to be a good buy as it`s P/E was really low compared to the other Companies. I bought it at 10$ and it trades at 11.14$ today. The Earningsreport was really really good and I feel quite good about it breaking it`s 52-Week high of 11.49 in the next couple days, maybe weeks.
http://finance.yahoo.com/q?s=ACET&ql=0
Obviously I might be totally wrong with my analysis but I felt like it was pretty ok.
Last edited by NiSash1337; 05-13-2013 at 04:57 PM.