Part-2 How to find out a share's value?

How to find out a share's value?

To begin with, you can read financial statements and understand the nitty-gritties of stocks. 

If you are willing to walk that extra mile, then pay heed to these valuation methods that Warren Buffet swears by: 

Method 1:
Look at the net liquid assets per share. 

Net liquid assets per share = Current assets (cash, debtors, liquid investments etc) - liabilities
Number of shares


Thumb rule: Warren Buffet prefers paying not more than two-thirds of such value for a stock.

Method 2: 
Look at the PE (Price to earnings) growth ratio.

PE growth ratio = Market price/ Earnings per share
  Annual EPS growth

where Annual EPS growth = Current year's EPS – previous year's EPS x 100
  Previous year's EPS'


Thumb rule: A PE growth ratio of 1 indicates a fairly valued share; less than 1 means undervalued; and more than 1 means overvalued.