The fair price of shares cannot be beaten flat. Each share has a fair price limit that is not the same.
Now to find out the fair price of a stock, investors can calculate the Price to Earning Ratio (PER). When the PER value actually gets higher, the issuer’s share price will become more expensive. And vice versa, the smaller the PER, the cheaper the valuation so that there is more room for an increase in stock prices. This ratio makes net income the main focus of calculations. So that we can know in real terms whether the price of a share is fair or not. Aside from that, if you also want to know more info regarding the stock exchange, we recommend you read more at alphabetastock.com immediately.
In doing fundamental analysis, not only the numbers seen but also other factors such as the big name of the company and its brand. Also, it is necessary to analyze the current condition of the stock sector, whether it is in good condition or not. If such a thing is considered positive, it could be said that the PER figure is still cheap.
Apart from PER, investors must also understand Price Book Value (PBV). This ratio is also almost the same as PER, which is to see the fair price of a share.
This PBV is the same as PER. The difference is, if PER focuses on the net income generated by the company, PBV focuses on the value of the company’s equity.
Or in other words, PBV is the ratio of the share price to the issuer’s book value. A formula for total equity divided by the number of shares outstanding can be utilized to calculate this value.
A low PBV indicates that the stock price is still cheap or undervalued, while a high PBV indicates that the stock price is quite expensive.
Usually, if the PBV is high, investors are advised to look for stocks with PBVs that are lower than the industry average PBV.
