Valuing Common Stock

Pamela P. Drake, Frank J. Fabozzi and Francesco A. Fabozzi

Chapter 17 in Introduction to Finance:Financial Management and Investment Management, 2022, pp 487-511 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this chapter, we discuss practical methods of valuing common stock using two methods: discounted cash flow models and relative valuation models. Both methods require strong assumptions and expectations about the future. No one single valuation model or method is perfect. All valuation estimates are subject to model error and estimation error. Nevertheless, investors use these models to help form their expectations about a common stock’s fair market price.

Keywords: Financial Management; Investment Management; Derivatives; Common Stock; Bonds; Company Analysis; Entrepreneurial Finance; Financial Instruments; Financial System; Financial Statements; Time Value of Money; Yields; Present Value; Future Value; Financial Strategy; Dividend Policy (search for similar items in EconPapers)
JEL-codes: G1 G3 N2 O16 (search for similar items in EconPapers)
Date: 2022
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