![]() ![]() The final step is to look at what the ratio of each of consensus forecasted cash flows is relative to the current market valuation for each peer comp (which is either enterprise value, for forecasted cash flows available to all providers of capital - sales and EBITDA, or market capitalization, for forecasted cash flows available only to equity capital providers - OCF, FCF, net income, and dividend payments) Next, we look at consensus broker estimates for a whole range of cash flow figures for 2023E and 2024E - sales, EBITDA, OCF, FCF, net income, and future dividends I pulled just the standard peer comps for AMD off of Factset to get an idea of both equity value (share price x fully diluted shares outstanding) and enterprise value (equity value + net debt, which for the sake of simplicity is the total interest bearing debt a company has on it's balance sheet minus cash) The answer is you look at different peer multiples across different categories to get an idea of how much the market values a specific company to what the market thinks their individual future cash flow prospects look like. ![]() Say you like the semiconductor industry and you're looking to dump your $200 somewhere therein - how do we define how "cheap" or "expensive" AMD is to INTC or QCOMM is to TI? Stand alone share prices doesn't really tell you much about how valuable a company is to it's peers, so how do you compare these guys so everything is apples-to-apples? Most public companies that fall into the "mature value stocks" category are also generally going to pay a steady dividend to their equity holders, so the dividend yield (annual dividend / current share price) will also play a factor in how cheap / expensive a stock is Any other big, unfunded infrastructure projects that have assets crisscrossing state or federal boundaries.any company with significant operations in India) oil and gas company operating in Venezuela) or a notoriously big and convoluted bureaucracy (e.g. Other publics whose primary operations center around the exploration, production, and / or refinement of natural resources in an unstable political environment (e.g.Pre-FID LNG liquification / gassification companies.Things like greenfield nuclear electric utility companies.companies operating in a super uncertain regulatory environment with an equally uncertain timeline to gaining all regulatory approvals to begin operations. nascent, relatively unproven tech like solid state EV batteries or space tourism) and regulatory risk (e.g. Relatively safe investment - risk of your $200 going to $0 is fairly small, but the upside of your $200 going to $400 is also fairly lowĪlong those same lines, you'll probably want to look at tickers in a fairly mature industry, with limited technology risk (e.g. ![]() So, assuming your investment goals are something along the lines of Nor does it tell you much about the amount of risk you're bearing by buying F over JNJ or vice versa. When looking at the entire universe of publicly traded stocks you could dump that $200 in capital into, the $ / share of, for example, Ford vs Johnson & Johnson tells you nothing about how cheap or expensive one is relative to the other. You're thinking about "cheap" stocks incorrectly here, with regards to allocating, say, $200 in equity investments. ![]() Most information to help you learn and practice can be found in our wiki. Related Subreddits (see the rules above for related subs as well) Read here for more info.Īlmost any post related to stocks and investment is welcome on /r/stocks, including pre IPO news, futures & forex related to stocks, and geopolitical or corporate events indicating risks outside this is offtopic and can be removed. Consider posting to r/SPACs, r/pennystocks, or r/weedstocks instead. No penny stock discussions, including OTC, microcaps, pump & dumps, low vol pumps and SPACs. Non-ETF-related Crypto goes on r/CryptoCurrencies info. No bitcoin or crypto discussions unrelated to stocks. Trolling, insults, or harassment, especially in posts requesting advice, will be removed. Posts regarding this topic will be automatically removed. The Robinhood app should be discussed in /r/Robinhood. Low effort mentions for meme stocks will be removed, see here. Instead, advertise here.Ĭontext & effort must be provided empty posts or empty posts with links will be automatically removed. Spam, ads, solicitations (including referral links), and self-promotion posts or comments will be removed and you might get banned. Rules (in depth rules wiki here)ĭisclose any related open positions when discussing a particular stock or financial instrument. Almost any post related to stocks is welcome please read the rules below:Ĭlick here to find how many days old your account needs to be and how much karma you need before you can comment or post to r/Stocks. ![]()
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