Intrinsic value and stock valuation

Market Capitalization and Net Worth

RupeesShare PriceBook
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Net worth also called as "Shareholder Equity", "Stockholder's Equity", "Net Asset Value" or
"Book Value". It essentially means total assets minus total liabilities.
When you buy shares of a company, you are essentially buying a share of the company's
net worth and a share of the company's future cash flows. If the company's net worth and
cash is growing, the value of the company is going up because of which the company's
share price goes up.
The above chart displays the share price and the book value per share. Generally the share
price is above the book value price but during a recession (e.g. 2008) or due to some other
factors, the share price can go below the book value per share. Smart bargain investors buy
shares when the current market price is below the book value i.e. the stock is undervalued
but at the same time you have to ask yourself why the current market price is going below
the book value price. Is it because of some serious fundamental problems with the
company?
Current Market Price : 856.95 Rs. on 05-December-2014
Market Capitalization of ING Vysya Bank Ltd. is ___ Rs. (Sign up for Premium
Service to see the market capitalization.)
Market Capitalization = Share price x No. of shares ( theoretical price at which you can buy
the whole company )
Enterprise Value = Market Capitalization + Short term debt + Leases + Long term Debt +
Preferred Stock - Cash in hand

Stock Valuation Models

Valuation in simple words is the process of estimating what something is worth. The
valuation models given below are used by investors like Warren Buffet, Investment bankers
and private equity firms as the starting point for evaluating potential mergers and stock
acquisitions. You can use the same models to figure out if the current market price of the
stock is overvalued or undervalued. Do not blindly buy or sell stocks just because one
valuation model tells you to although if three or more models come to the same result then it
may be wise to act on that decision.
Remember investing is a combination of science and art. These models give you an
estimate which may or may not be accurate. There are some things which cannot be
captured by these models such as the value of a brand name or the value of a patent and
other intangible assets. So keeping these few things in mind explore the section below and
see the real picture of the company as seen by market professionals.

Current & Historical Price to Earnings Ratio of ING Vysya Bank Ltd.
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The P/E ratio looks at the relationship between the stock price and the company's earnings.
The higher the P/E the more the market is willing to pay for the company's earnings.
By comparing price and earnings per share for a company, one can analyze the Market's
stock valuation of a company and its shares relative to the income the company is actually
generating. It is usually used to compare the P/E ratios of one company to other companies
in the same industry sector. Ideally you should avoid investing in a company which has a PE
Ratio greater than 20.
ING Vysya Bank Ltd. Average PE Ratio : ____ ( Premium membership tells you if current
PE is lower or higher than long term average PE )

PE Ratio Valuation
Price per share = 10 Years Average P/E Ratio x EPS
Since this intrinsic value depends on Earnings per Share which is based on reported
earnings or "accounting profits" which can be manipulated. We take the average EPS of the
last 3 years instead of the current EPS and average P/E ratio for the last 10 years instead of
the last trailing 12 month P/E ratio.

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Discounted Cash Flow Valuation

The purpose of a discounted cash flow is to estimate the sum of the future cash flow of the
business and discount it back to the present value.
We start with an assumption that we want to earn 10% on our investment yearly. So the
question we are going to answer is "What price can I pay for ING Vysya Bank Ltd. if I want
to earn 10 percent annual return". We use the multi-year median Free Cash Flow growth
rate for DCF valuation. The discount rate and the estimated cash flow numbers are then
used in the net present value formula which calculates the intrinsic value of the company as
well as the intrinsic value per share.
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Net Present Value is ____ Rs.

DCF Intrinsic value per share of ING Vysya Bank Ltd. : ____ Rs.

EPS Growth Valuation

Similar to Free cash flow valuation model we project the Earnings Per Share for the next ten
years. Then we use an estimated Price/Earnings ratio to calculate the future stock price

which is then discounted back to present value giving us an intrinsic value per share.
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Graham Number Valuation

Graham Number was created by Benjamin Graham, the father of value investing. It
calculates the stock's maximum fair value based of its Earnings per share and Book value
per share. Stocks trading below their Graham Number may be undervalued.
Graham's Fair Value Price = Square Root of (22.5 x EPS x BVPS)
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your own using the company's financial statements.

Note - Graham number is useful for companies which depend more on their tangible assets
(e.g. Manufacturing, Oil & Gas). It is not so useful for companies which depend more on
their intangible assets (e.g. Pharma, IT).

Intrinsic Fair Value Share Price Range for ING Vysya Bank Ltd.

DCF valuation

: ____ Rs.

PE Ratio valuation

: ____ Rs.

EPS Growth Valuation

: ____ Rs.

Graham Number

: ____ Rs.

Book Value

: 387 Rs.

Fair Value

: ____ Rs.

20% Margin of Safety

: ____ Rs.

Current market price

: 857 Rs.

PEG Ratio

: ____

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models.

Note - Margin of safety is a principle of investing in which an investor purchases stock only
when the market price is significantly below its intrinsic value. This difference allows an
investment to be made with minimal downside risk. The term Margin of Safety was
introduced by Benjamin Graham (Warren Buffett's teacher) in his famous book The
Intelligent Investor
Note - Adjusted PE Ratio is calculated as Current market price / 3 year median EPS.