The Little Book of Valuation: How to Value a Company, Pick a Stock, and Profit
by Aswath Damodaran
How do you determine if a stock is overpriced or a bargain? NYU finance professor Aswath Damodaran explains.
“There are dozens of valuation models but only two valuation approaches: intrinsic and relative… The intrinsic value of an asset is determined by the cash flows you expect that asset to generate over its life and how uncertain you feel about these cash flows. Assets with high and stable cash flows should be worth more than assets with low and volatile cash flows… In relative valuation, assets are valued by looking at how the market prices similar assets.”