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Economics : Stock Valuation And Analysis


STOCK VALUATION1Stock Valuation and Analysis: General
MotorsNameInstitutionCourseDateSTOCK VALUATION2IntroductionStock
Valuation is the process through which investors ascertain the
long-term value of acompany’s stock so that they can make an
investment decision. Stock valuation is ascertainedusing different
financial ratios but not limited to the Dividend Discount Model
(DDM) and thePrice-to-Earnings (PE) ratio. The stock valuation
focuses on the company’s managementefficiency, financial stability,
and earnings growth to ascertain whether the company’s stock
isovervalued or undervalued. With such information, investors will
decide whether to buy or holdstocks. In this report, General Motors
stock valuation information will be analyzed to ascertainits
investment worthiness based on the critical elements of its stock
potential.The Relationship between the Value of the Stock and the
Price to Earnings RatioThe relationship between the value of a
company’s stock and its price to earnings ratios isthat the PE
ratio is used as the baseline of valuing the stock, given that it
measures the return oneach price paid to the stocks of the company.
Since the main motive of investors is to earn profitsfrom the
investment in the stocks, the price paid to acquire the stocks is
measured against theearning from the stocks to ascertain the real
monetary value of the stocks (Ross, Westerfield,Jaffe & Jordan,
2016). Thus, stock value is directly related to the PE rat …

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