• Numerology
  • Spirituality
  • Astrology
  • Palmistry
  • Psychics
  • News
  • Magic

Value Investing Numerology: Strategies And Pros And Cons


Investing in some of the best value stocks right now depends on your means to capitalize on inefficiencies in the market. Value investing requires a thorough understanding of the stock market.

Value Investing: How To, Pros And Cons

What Is Value Investing?

Simply put, value investing is a long-term strategy to buy stocks where the market price is below the stock's intrinsic value. On the other hand, when a stock is trading at a price higher than its inherent value, investors consider such stock to be overvalued.

Value investors carry the belief that share prices do not justify the long-term fundamentals of a company because such prices are considerably dependent on market behaviour.

COPYRIGHT_JN: Published on https://joynumber.com/value-investing-strategies-and-pros-and-cons/ by Amy Daley on 2022-04-12T01:25:07.815Z

How Do Investors Derive Intrinsic Value?

When looking for value stocks, value investors look at a company's financial history, its revenues and cash flows over the years, business model, future profitability, etc.

They also look at:

  • Indulgence in a financial scam.
  • The credit rating of a company signifying its debt clearing capacities.
  • Profit or loss during the previous market recession.

They might also choose to investigate why stocks of a company are undervalued, and whether they have the necessary organisational and financial capacity to recover from such undervaluation.

In addition to the qualitative indicators, a value investor also analyses multiple financial metrics to arrive at a more concrete conclusion regarding the underlying potential of a company, which are:

Earnings Before Interests And Taxes (EBIT)

It's used to determine a company's cash flow without the effect of secondary expenses and profits. Taxation, here, is a primary factor as its laws allow for certain phenomena that might mask a company's real earning potential.

For instance, a company might suffer losses in its initial years, but if it is founded on a sound financial and organisational framework, it shall generate profits in subsequent operating cycles. However, as tax laws dictate, companies can choose to carry forward their losses into following years to set off against future profits, causing such future profits to be lowered. It masks a company's earning potential. Hence, taxation is left out to determine a company's intrinsic value.

Earnings Before Interests, Taxes, Depreciation, And Amortisation (EBTIDA)

It is a development on EBIT, whereby earnings are calculated after excluding depreciation and amortisation expenses. Depreciation and amortisation are provisions and do not affect actual cash flow. Therefore, it provides a more detailed and precise insight into a company's earning potential.

Discounted Cash Flow

This is a crucial metric which allows investors to devise a company's future cash flows and find their current value. It uses a discounted rate accounting for price level increase. Investors use this metric to determine the present value of a company and its future potential. As investors learn more on EBIT and EBTIDA, they know whether its stocks are undervalued or not.

P/E Ratio

Price-to-earnings ratio or P/E ratio signifies the relationship between a company's share prices and per-share earnings (EPS).

P/B Ratio

Price-to-book value ratio signifies the per unit book value of a company's assets and per unit share price. For a company, the former is derived by dividing the total book value of a company's assets by the market value of its outstanding shares. In case a company's share prices are lower than its per unit book value, it denotes that its stocks are undervalued.

Advantages Of Value Investing

Risk Minimisation:

In general, investing in equity shares is associated with high risk due to its correspondence with market fluctuations. However, with value investing, investors mitigate that risk by earmarking stocks that are undervalued, and thus, can purchase potent shares on sale. Eventually, these shares would reach their intrinsic prices or maybe go higher, which would allow them to earn substantial capital gains.

Investors of this category use margin of safety to attenuate the associated risk. It means purchasing a share when its prices are lower than a particular limit. Thus, even if they are wrong about a specific company, losses, if any, would not be significant. Benjamin Graham, for instance, only purchased stocks when their prices were 2/3rd of the intrinsic value.

Substantial Returns:

Value investing, if done accurately, will give you above-average returns in the long-term.

Disadvantages Of Value Investing

One of the primary disadvantages of value investing is that it does not provide higher returns in the short-run and thus compels investors to lock their capital for a considerable period.

Secondly, value investing online or offline consumes a significant amount of time as investors have to dedicatedly seek out companies that are undervalued.

Strategies For Value Investing

The key strategy to invest in undervalued stocks is by using the metrics explained before such as EBDITA, EBIT, P/E ratio, etc. Those of you who are willing to adopt value investing need to properly analyse a company, derive its intrinsic value to realise substantial profits and minimise risk. Another strategy is to keep an eye on companies that have assets which are not properly reflected in their balance sheet. Such assets include intellectual property like patents. Their value might increase in the future owing to market conditions, which causes stock prices to rise substantially.

Share: Twitter | Facebook | Linkedin

About The Authors

Amy Daley

Amy Daley - My hope is that Joynumber.com will help you find your place in the world and allow you to believe in yourself and your divine purpose. You can accomplish that with a few easy steps, though they do take some effort to master. The first step is noticing these numbers and their patterns as you go about your day. The next step is knowing what they mean. Numerology will help you understand what you’re seeing and to apply practical solutions to help. You have the ability to change your life and manifest your dreams. Numerology simply helps you do that.

Recent Articles

  • 1112 Twin Flame Meaning And Its Significance In Life

    Twin Flames

    1112 Twin Flame Meaning And Its Significance In Life

    The angel number 1112 twin flame may be quite helpful in your search for your twin flame. You get confidence and bravery from it. You may have more pleasant dreams with the assistance of this number. Furthermore, you and your twin flame will be drawn to each other.

  • 48 Angel Number Twin Flame - Believe In Perfect Timing

    Twin Flames

    48 Angel Number Twin Flame - Believe In Perfect Timing

    Your guardian angel's message to you in the form of the strong number 48 should not be ignored. 48 angel number twin flame have the ability to manifest anything right now, including a twin flame relationship.

  • 733 Meaning Twin Flame - You Will Soon Find Your Twin Flame

    Twin Flames

    733 Meaning Twin Flame - You Will Soon Find Your Twin Flame

    733 meaning twin flame may already be present in your life, but you are separated from one another. For many individuals, the angel number 733 has significant importance. Once you realize the actual purpose of your life, great things are in store for you.

  • Find Out Your Horoscope Today, 23 November 2022


    Find Out Your Horoscope Today, 23 November 2022

    Isn't it wonderful to know what your day has in store for you in advance? In this daily Horoscope today, 23 November 2022, for Aries, Taurus, Gemini, Cancer, Leo, Virgo, Libra, Scorpio, Sagittarius, Scorpio, Capricorn, Aquarius, and Pisces, you can find the answers to your most pressing questions about love, health, money, and career.

  • Horoscope Today, 22 November 2022 - Check Astrological Prediction


    Horoscope Today, 22 November 2022 - Check Astrological Prediction

    The alignment of the moon and sun determines the daily horoscope. The features and qualities included in a person's horoscope shape his or her personality. Horoscopes offer us a heads-up on everything we may expect to experience during the day. Read on to know more about Horoscope today, 22 November 2022!

  • Horoscope Today, 21 November 2022 - Check Astrological Prediction


    Horoscope Today, 21 November 2022 - Check Astrological Prediction

    Horoscope Today, 21 November 2022 - The alignment of the moon and sun determines the daily horoscope. The features and qualities included in a person's horoscope shape his or her personality.

  • Truth About Your Guardian Angels - Our Heavenly Companions


    Truth About Your Guardian Angels - Our Heavenly Companions

    The truth about your Guardian Angels is that they are assigned to guard a particular person, especially with respect to helping that person avoid spiritual dangers and achieve salvation. Guardian Angels may also help the person avoid physical dangers, particularly if this will help the person achieve salvation.

  • 9757 Angel Number - Meaning And Hidden Secrets

    Angel Numbers

    9757 Angel Number - Meaning And Hidden Secrets

    The 9757 angel number advises you to consider your goals in life and make adjustments that will help you achieve them. Your angels are very happy for you that you've come this far, and they want you to succeed. The 9757 angel number means that sometimes you need to make obvious changes, like giving up bad habits or getting rid of toxic people from your group.

  • 1669 Angel Number - Take Pride In Your Accomplishments

    Angel Numbers

    1669 Angel Number - Take Pride In Your Accomplishments

    The 1669 angel number suggests that angels make an effort to get you to think strategically. This number keeps showing up, which draws your attention to the synchronicities that emerge in your underlying components. Never assume that something you run over is an event, especially if it has a significant impact on your life.

  • 644 Meaning - Finding Your True Self In A High-Dimensional Light

  • Horoscope Today, 18 November 2022 - Check Astrological Prediction

  • 606 Angel Number Meaning - Make A Mental Change

  • Horoscope Today, 17 November 2022 - Check Astrological Prediction

  • 8003 Angel Number - A Transcendence Of Dualities