Hi all, I am interested in learning and understanding how each of you formulate the intrinsic value of stocks. I think this would be valuable to each and everyone as well.

I have been researching a lot about this by Warren Buffet, Peter Lynch etc etc however some financial data they use aren’t available in financial reports compiled by Sri Lankan companies. I have been struggling to gain knowledge on this topic it’s a really important aspect to move forward in the investing journey.

Would appreciate if anyone could share some light on this and educate the community. Thank you in advance!!

  • My understanding of Intrinsic Value calculations (from my undergrad degree) is Discounted Cash Flow (DCF) and Dividend Growth Model.

    Can you give examples of financial data missing in SL financial reports?

    parent

    Thanks for your response! And yes, for example, Capital Expenditure.

    parent root
    parent root

  • There are various methods to calculate the intrinsic value of a company and it changes depending on the business model. Mainly you have the discounted cash flow model, dividend discount model, Residual income model and asset based valuations like justified price to book value.

    You can also use relative valuation methods like forward P/E ratios where you forecast the future earnings of a company and calculate its P/E ratio after accounting for those earnings. If the forward P/E is much lower than the industry average or for similar companies with the same business model, that company is considered undervalued and you can expect the price to go up and normalize at its new fair value.

    By the way, what information are you unable to find in Sri Lankan financial reports that are there elsewhere?

    parent

    Thanks for your response! And sorry about that, I was mistaken due to different terminology, those information are there. For example, capital expenditure.

    parent root