There are multiple methods that can be used to determine a stock’s intrinsic value. These can include utilizing such factors such as dividend streams, discounted cash flows, residual income, comparable companies’ analysis, etc. Select at least one approach and explain why you feel that is a good method for determining the intrinsic value of a stock.
Then, select a publicly traded company in Saudi Arabia, and use your selected method to determine what you consider is its intrinsic value and illustrate whether you feel the stock is underpriced, overpriced, or fairly price. (Make sure your selected company is different from your classmates’). Explain why these concepts are important to business leaders in Saudi Arabia and Saudi Vision 2030.
Search the SEU library or the Internet for an academic or industry-related article. Select an article that relates to these concepts and explain how it relates to doing business in Saudi Arabia.
For your discussion post, your first step is to summarize the article in two paragraphs, describing what you think are the most important points made by the authors (remember to use citations where appropriate). For the second step, include the reference listing with a hyperlink to the article. Do not copy the article into your post and limit your summary to two paragraphs. Let your instructor know if you have any questions and enjoy your search.
You are required to reply to at least two peer discussion question post answers to this weekly discussion question and/or your instructor’s response to your posting. These post replies need to be substantial and constructive in nature. They should add to the content of the post and evaluate/analyze that post answer. Normal course dialogue doesn’t fulfill these two peer replies but is expected throughout the course. Answering all course questions is also required.
This week’s discussion question asks you to explain the differences between market price per share and intrinsic value (a fundamental price), and factors that determine the fundamental price of a stock. There is also a live session this week. Be sure to support your statements with logic and argument, citing any sources referenced. Post your initial response early, and check back often to continue the discussion.
These post replies need to be substantial and constructive in nature. They should add to the content of the post and evaluate/analyze that post answer. Normal course dialogue doesn’t fulfill these two peer replies but is expected throughout the course.
Finance Principles for This Module
- Principle 1: Cash Flow Is What Matters—We are concerned with the money in hand, not accounting profit.
- Principle 2: Money Has a Time Value—Money received today is worth more than an equal amount of money received in the future.
- Principle 3: Risk Requires a Reward—We don’t take additional risk unless we are compensated with additional return.
- Identify the basic process for financial securities.
- Identify the basics of stocks.
- Calculate stock value and expected return.