Undervalued Stock

[robertbanking]

Hello you very intelligent and amazing individuals that make up this forum, i sincerely hope that your investing continues to do well.

I kindly wondered i know alot of people mentioned that Tesla stock was very undervalued at the beginning of this year, if you review the share price since earlier this year it has grown significantly. There is lots of different measures of determining if a company is undervalued, i recently have been using Enterprise Value. I kindly wondered what ratio or calculation you feel is best to determine the true value of a company and whether its undervalued please? I know Warren Buffett and Benjamin Graham have there different formulas but what do you feel is the best or more accurate please? If anyone kindly had any thoughts on this i would be forever grateful and thankful for your support with this.

Sending you lots of good wishes and i truly hope you have massive success investing and have a wonderful life. All the very best.

[Mike4]

I don't think there is any "true value" of a company other than the sum of all the future dividends it will pay pay out, adjusted for inflation and the delay in payout. This value cannot be calculated or divined unless you put new batteries in your crystal ball, so can only ever be a matter of opinion.

But I know nothing much about this stuff, being a humble boiler technician. Others will be along shortly to explain how hopelessly wrong I am

[Charlottesquare]

I make a lot of my initial indicative reviews using P/E but then usually find lots of reason why that P/E of say 7 or 8 comes with some considerable risks- over the years most of the shares I consider undervalued the market seems to further undervalue post my purchase.

Prime example is my ownership of Smith (DS). I know the industry may have some issues re own boxes and say Amazon but find my HL reported P/E of 6.82 hard to understand notwithstanding these. I would expect share price stutter if it had been priced with a P/E of 20 as a growth stock and that future was less clear but it never was priced as a growth stock.

It is not the end of the world, I purchased in two tranches in June 2022 and am only down 3% ,but do find it annoying that the markets do not share my conviction that it is a sound company. Still, a 6.29% div yield with dividend covered nearly twice is not to be sneezed at.

I appreciate sizeable goodwill on balance sheet but this is now a company with a market cap below its NAV but it is still churning out profits.
However the market is the market, it evidently differs in view so all i can do is hold, take the dividend and hope the market eventually comes around to my way of thinking.

So my approach, initial P/E, root into accounts etc, sniff market, plunge in, hold until market agrees with me or proves to me I was an idiot.