24 Jun 2025 3:14 pm
Depends on what you are trying to put a value on. Privately owned assets and businesses are much different than publicly traded large and mega-cap securities. Valuations are far more important due to lack of liquidity. Staying power, exposure to debt and protection from the downside in a declining economy is much more important. Financial ratios will tell at least part of the story.Blackvegetable » 24 Jun 2025, 2:40 pm » wrote: ↑ when you are done, you will have an intrinsic value.
It will either be greater, less than, or equal to the market value.
But you cannot do a better job at arriving there than a professional....so there's really no point to fundamental analysis unless you are convinced you can.
The leverage is in understanding its value relative to its peers and the market, and betting correctly on the macro.
When it comes to publicly traded securities, I will look at industries and companies within industries. As you said, the ratios help to evaluate companies in a specific industry or sector against each other. But, they are also "no-go" markers for me. For example, I won't invest in Tesla. Its a car manufacturer that has been around for quite some time, and has been overvalued for quite some time (IMHO). With a P/E in the 160's, I don't see the growth that Amazon exhibited when it had a ridiculous P/E. So, there are plenty of cross-industry comparisons that can be made as well. Then, there are income/dividend stocks - completely different type of evaluation going on there.
When it comes to long-term investing, the professionals do not really know any more than I know, at least within certain sectors they don't. Now, with day-trading, the professionals will generally be able to beat me. They have better, faster access to information than I do, and they can more quickly apply the information to trades they are considering. This is why I am generally not a day trader. Not unless one of several stocks I follow set up in a trading pattern - then, I'll play.