Forager Introduction to Investing: How to Value a Share

The value of a share is the present value of all of the future cashflows its owner is going to receive. On that, finance students, broker analysts and value investors agree. So why do we see people talking about PE ratios, price-to-book ratios and a wide range of other valuation metrics? In this fourth installment of the Forager Introduction to Investing Series, Gareth Brown and I discuss how and when these metrics can be useful short cuts. Most importantly, we explain that you need to understand a business before you can even begin to value it.