Hi people, I've lately been reading about stock analysis through books I could get hold of. But I'm unable to find any particular book that tells me how to calculate what the value of a business is. Can anybody here recommend books that deal with the matter? More specifically, are there books that describe in detail how value-investors value a business? Also, are mainstream models of valuation reliable?
I'm not an expert but I'll give my $0.02 anyway.
I see three different valuations of a company. First, there is the stock price. This seems obvious but it's worth noting because the actual price is the only price in Austrian theory. Second, there is liquidation price. This is the price of the company if it were declared bankrupt and parceled out. This can theoretically be calculated by looking at the company's net asset value. Finally, there is the sale price. This is the most fuzzy number because it includes the "expected" cash-flow of the company, its net asset value, plus whatever other speculative factors might attract or repel investors. I think it's this last number that you're asking about and I think that number is precisely what speculating on stocks is all about. Each buyer/seller/holder of a stock has his own private "number" that he's placing on the stock's sale value.
Clayton -