Value And Value Of Buy A Potato Peeler

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As a long-term investor, you are looking for value rather than profit. If you were to buy a potato peeler, you could buy one that is very cheap that will last a few months, or you can buy an expensive one that lasts a year or more. Just because a share price is low doesn’t mean it is a bargain. Good investors buy shares because they are undervalued and not because they are cheap. They look for value first and price second. If the value of the shares appears higher than the share price, then it may be worth investing a little money. A Quick Tutorial On Value Look at the profit and loss statement in the company’s annual report. If you wish to gamble, then you could invest in a company that is losing money. If you are looking for value,…show more content…
what they have minus money they owe). This is known as the company’s net worth. For example, a company may have 10,000 shares at $5 each. That means the market cap/value is 10,000 x $5 = $50,000. The book value of the company is the net worth, which may be $75,000. In this case, the company is undervalued because its shares are worth less than the value of the company itself. This means it is potentially a very valuable investment. If the market cap was $100,000, then it is a little overvalued by the market and may not be such a good investment in basic terms. Using the book and market value is a safer way to judge value, but you shouldn’t rule out other factors. For example, the shares may be overvalued by the market because the company has just created a new product that many people think will be successful and will make the company grow more quickly in the future. Similar is true if the company is undervalued. The directors may have just sold most of their shares because they fear the company is going to fail, and the share price dropped dramatically, which makes the shares undervalued. The Price-To-Sales Ratio And The Price-To-Earnings Ratio These are two figures you can check to see if the company is legitimately profitable. Are they making enough money and are they earning enough money. Valuable shares are linked to how well and how easily the company makes money and makes profit. It may be worth learning more about these ratios if you would

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