Beginning investors in particular are faced with what seems a daunting task. Setting up that first portfolio. First there is asset allocation. There are many straight forward asset calculators available on the internet so we won’t go into that today. Then there is stock portfolio diversification. You sure don’t want all volatile semi-conductor companies in your portfolio. That is the subject of a whole other article. Once you’ve decided what sectors you’d like, just how do you value those companies to see which ones may be undervalued? That’s the subject of today’s article.
You can go through a whole discounted cash flow analysis but that can be involved and beyond many investors skills. What many people have searched for is a quick and easy stock valuation method that can give you the yea or nay if that particular stock deserves further research. If a stock is already trading at or above it’s fair value why waste any more time on it? So how do we determine a value range without spending hours on end? Most of us have day jobs after all.
Some years back I ran into a fairly easy valuation sheet from AAII.com that you filled in the numbers, pulled out the calculator, and voila! There on the page was a value range estimate. It did take some effort to look up the numbers and crunch them all through your calculator. It only took me a time or two of using the sheet to realize it was a natural for use in a spreadsheet. So here it is, the stock valuation spreadsheet. I didn’t stray far from the original version, mostly just automating the calculations. Simply fill in the blue shaded cells and let the spreadsheet to the heavy calculating for you. Have fun!
This material is not financial advice or an offer to buy or sell any product.
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