Seun:
1. Determine how much you would reasonably pay for the entire company if you had enough money to buy it.
2. Divide this by the number of shares issued by the company. That gives you the true value of the stock.

Bros Seun, it is easier said than done. If this was the case, there should be loads of billionaires all over. What are the bases you take into consideration when doing the "bolded" above?

shigidi:

Exactly how does one define an exit point? For instance, i purchased skye a6 5.50 and did not pull the trigger at 7.05. Now it lingers at 5.80. Do you have a percentage appreciation at which you call it quits with the hope of re-entering?

I am a long term investor in stock, due to this my exit point is whenever a stock sell very high compared to the intrinsic value. I think every investor should learn how to value a stock or a company.

I will not give a definite percentage increase on the purchase price in order to determine your exit point. Some one bought Okomu Oil at N12, when the stock got to N18 the investor sold hoping that the price of the stock will fall again but alas the price of the stock skyrocketed only to stabilize at around N95.00.

The most important thing is for an investor to find out the investment strategy that works for him.

laz_inc:

Bros Seun, it is easier said than done. If this was the case, there should be loads of billionaires all over. What are the bases you take into consideration when doing the "bolded" above?

You look at the company's earning, asset, market share, managerial competence, growth opportunities in the sector etc.

The argument of dividend vs non-dividend is like asking about a house that brings rent or not. A no-brainer in my opinion. For instance, a flat in 1004 goes for 60M with rent of 3.5. Or a yield of 6%. A gtb, zenith, or julius berger will give you that same rate, and will still appreciate.

I think dat it is unwise 4 a new company in an untapped industry to pay dividend, when it can use d money to expand and improve operations dat would be beneficial to shareholders in d future. I was reading thru d analysis of companies in d NSE in d other thread,and d OP wrote about a company in d fast food sector dat paid out a dividend of about 300million during its first year of listing, and now d company share price has gone down to 50k. Such company should have focused more on improving its operations instead of paying out unsustainable dividend.

laz_inc: Bros Seun, it is easier said than done. If this was the case, there should be loads of billionaires all over. What are the bases you take into consideration when doing the "bolded" above?

How to determine the value of a business? Well, let's imagine that you want to buy a small business in your area. You'll probably start by inspecting all available financial records for the business to figure out how well the business is doing. You'll learn everything there is to know about the business - value of assets, salary cost, rent, cost of training employees, level of patronage and sales, competitive situation, etc. You will use this information to predict the future profits of the business, and you will not pay more than an amount that guarantees that the future profits of the business after tax will exceed the amount you paid for the business in a reasonable period of time.

That's exactly the kind of process you should go through if you're thinking of buying a stock. A stock should not be regarded as a piece of paper that fluctuates in value depending on whether the bulls or the bears are reigning or whatnot. A stock is a piece of a company. The value of a stock depends entirely on the value of the company it's a piece of. Nothing else matters.

If you do not have the patience to analyse a business thoroughly, then it would be foolish to acquire it. In the same way, if you don't have the patience to analyse public companies thoroughly, you should avoid picking and concentrating on individual stocks for your portfolio unless you just want to entertain yourself (like a gambler). Instead, you should practice extreme diversification by buying small quantities of many uncorrelated stocks that look generally healthy and relatively cheap (honest & competent management, good competitive prospects, and low P/E ratio). If you do that, you are likely to equal the general performance of the stock market or outperform it very slightly, which is the most that you can reasonably hope for if you don't know how to value a business.

Seun:
How to determine the value of a business? Well, let's imagine that you want to buy a small business in your area. You'll probably start by inspecting all available financial records for the business to figure out how well the business is doing. You'll learn everything there is to know about the business - value of assets, salary cost, rent, cost of training employees, level of patronage and sales, competitive situation, etc. You will use this information to predict the future profits of the business, and you will not pay more than an amount that guarantees that the future profits of the business after tax will exceed the amount you paid for the business in a reasonable period of time.

That's exactly the kind of process you should go through if you're thinking of buying a stock. A stock should not be regarded as a piece of paper that fluctuates in value depending on whether the bulls or the bears are reigning or whatnot. A stock is a piece of a company. The value of a stock depends entirely on the value of the company it's a piece of. Nothing else matters.

If you do not have the patience to analyse a business thoroughly, then it would be foolish to acquire it. In the same way, if you don't have the patience to analyse public companies thoroughly, you should avoid picking individual stocks for your portfolio unless you just want to entertain yourself (like a gambler). Instead, you should practice [b]extreme diversification by buying small quantities of many uncorrelated stocks that look generally healthy and relatively cheap (honest & competent management, good competitive prospects, and low P/E ratio). If you do that, you are likely to equal the general performance of the stock market or outperform it very slightly, which is the most that you can reasonably hope for if you don't know how to value a business.

[/b]

That's exactly what I'm doing in the stock market "Extreme Diversification" Looking out for companies that have durable competitive advantage like those you mentioned above with some other ratios (Profitability, liquidity, market and some special ratios) then carry out screening using the Ben Graham stock screening and Piotroski F - Score screening before making investment decisions. I invest in the stock market for the long term, with the slight ROI I'm getting so far, I still feel there's alot to be done.
I really want a situation where I can actually value a company, get the real worth of that company (Intrinsic value), then see if the shares of such company is actually trading at a discount with my margin of safety in place before I invest my money into it. The reason for this is because I'm looking into creating an investment arm of my company that will be dealing on stock investment.
At the moment, I'm trying to learn more on value investing. With the help of Bloomberg and Reuters where I get financial data of Nigerian public companies for the past five years to present, I'm learning how to use the DCF and DDM valuation methods and other qualities you listed above to know exactly the true worth of a company.
I want to believe I'm in the right track! Thanks

laz_inc: [/b]

That's exactly what I'm doing in the stock market "Extreme Diversification" Looking out for companies that have durable competitive advantage like those you mentioned above with some other ratios (Profitability, liquidity, market and some special ratios) then carry out screening using the Ben Graham stock screening and Piotroski F - Score screening before making investment decisions. I invest in the stock market for the long term, with the slight ROI I'm getting so far, I still feel there's alot to be done.
I really want a situation where I can actually value a company, get the real worth of that company (Intrinsic value), then see if the shares of such company is actually trading at a discount with my margin of safety in place before I invest my money into it. The reason for this is because I'm looking into creating an investment arm of my company that will be dealing on stock investment.
At the moment, I'm trying to learn more on value investing. With the help of Bloomberg and Reuters where I get financial data of Nigerian public companies for the past five years to present, I'm learning how to use the DCF and DDM valuation methods and other qualities you listed above to know exactly the true worth of a company.
I want to believe I'm in the right track! Thanks

Thanks for your contribution

In the coming week i will post names of companies and dividend being paid to assist those that need such information...enjoy

As i stated in my previous post, i will create time to post dividends and bonuses issued by various companies on the NSE to aid some people that want to get some of this information...Enjoy.


Security Year End Qtr Interim Div Bonus Closure Date Payment Date

ACCESS Dec Final 0.60 - 17/04/2013 25/04/2013 -

AGLEVENT Final 0.14 - 24/05/2013 02/07/2013 -

AIRSERVICE Dec Final 0.25 - 11/06/2013 28/06/2013 -

BERGER Final 0.70 - 22/04/2013 21/05/2013 -

DANGCEM Final 3.00 - 10/05/2013 03/06/2013 - BOCGAS Dec Final 0.20 - 21/05/2013 08/07/2013 -

CADBURY Final 0.50 - 15/04/2013 09/05/2013 -

CAP Dec Final 0.70 1:4 27/05/2013 -

DANGCEM Final 3.00 - 10/05/2013 03/06/2013 -

DANGSUGAR Final 0.50 - 25/04/2013 14/05/2013 -

It appears StartCredits, Nigeria's leading credit risk analytics company has calculated the expected returns of Nigeria's top stocks on the NSE using advanced models such as the CAPM. This will help Nigerian investor make better decisions on the investment portfolio.
https://startcredits.com/stocks-and-shares-return-on-investment-in-nigeria/