price, page-45

The game is all about being approximately right than precisely wrong (this is the single most common mistake perpetrated in the stockmarket, and very prevalent on forums like this).

An essential step is to differentiate between good companies and cr*ap companies.

How do you know which companies are good? Thats where experience comes in. You know them when you see them.

The valuation step is only the last step.
You have to have a feel as to what market multiples a company should command based on its intrinsic qualities (principally, Return on Invested Capital, growth options and quality/intergrity of management).

For instance, both CCL and WPL are currently trading on a PE of 18 and both have reasonable growth options, but WPL is more profitable, ie it requires less capital invested to generate a dollar of profit, therefore it is currently relatively undervalued compared to CCL.

On the other hand, CCL has a more 'stable' and predictable business. It must get bonus points for that.

Thats how I go about being approximately right.
I am not into calculating things to 4 decimal places.
Pointless.