Figuring out target prices for stocks

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  • #196035 Reply
    Nigel

      I’m trying to improve my stock analysis skills and figure out how to calculate realistic target prices. I’ve read about approaches like discounted cash flow, price-to-earnings multiples, and technical analysis, but I’m struggling to understand how to choose the right method for different types of stocks.

      For instance, when looking at growth stocks with high valuations, how do you estimate a target price without relying on assumptions that feel too optimistic? I’d love to hear how you approach this and any examples of stocks where your target price predictions worked out – or didn’t!

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      • #196064 Reply
        Nick Homes

          I’d start by learning:

          Price-to-Earnings (P/E) Ratio Method

          This method estimates a stock’s target price by multiplying its projected earnings per share (EPS) by an expected P/E ratio.

          Formula: Price Target = Projected EPS × Expected P/E

          Discounted Cash Flow (DCF) Method

          The DCF method determines a stock’s value by discounting its future cash flows to their present value.

          Formula: Price Target = Future Cash Flows ÷ (1 + r)^n

          Where r is the discount rate, and n is the number of periods.

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