The stocks are not just shares of a company before investing in a value stock one need to understand the term of value investing, that what does it mean and how it make our thinking more mature regarding stocks.
Value investing basically termed as to understand that which stock is selling in the market at its lowest price because of some financial crisis or any other factor its available at its lowest price and market has undervalued it, to find such type of stocks is called value investing.
The value investing thought was pioneered by Benjamin Graham and it also came up with flaw of this thought or strategy that is to decide the intrinsic value of any company is lacking in that.
Margin of Safety
That is the reason; Benjamin Graham always counseled to calculate the margin of safety before any investment in any company or calculation of the basic worth of any company.
To calculate the basic worth of any company before buying its stocks and buying it at right price is called value investing and according to Benjamin Graham one should have strict parameters before buying any shares and this is the called the safety of margin that should have some space in your investment.
If one would not buy the stocks at that price he passed away an opportunity of value investing from his own hands by not sticking to this powerful strategy.
Now we are going to discuss about some financial statistics that matters a lot in value investment and are beneficial for the investors to get knowledge about it.
1. price to book ratios
2. Price to earnings ratio
3. Price to cash flow ratios
To do your value investment these are important financial tools that an investor must look on it as it can give him a brief and detail graph about the financial history of that company and about its actual worth in the market.
The target of value investor is to find out the why a company’s stocks are coming down and what are the factors or reasons that allows that downfall and clearly unveils on you that company is on solid pacing financially or not.
In value investing before making any investment strategy one need to know about the past financial behaviors of company in depth through all required report or graphs and on all those factor that are making the price of its shares down and after calculating the central and basic worth or capacity of that company or organization a value investor can be in a position to decide what is the suitable time to invest in that company how this investment will give better profits by keeping eye on the safety margins value investor can do value investment and earn profits by just his vision and capacity to understand the company worth and that point.