33 Stock Valuation Worked Example

This video demonstrates how to calculate a stock's present price when faced with changing growth rates. We begin with an initial book value and a period of high return on equity (ROE) and reinvestment, followed by a sustained period of lower ROE and reinvestment. The example walks through calculating earnings per share (EPS), dividends, and book value for each year, then uses a multi-stage dividend discount model to arrive at the final stock price. This example combines concepts from various financial models, emphasizing the importance of laying out calculations year by year when growth rates are not constant. It highlights how to flexibly apply the Gordon Growth Model and dividend discount principles to determine a stock's intrinsic value. To learn more about stock valuation and financial modeling, visit AxiomTutoring.com and subscribe to @AxiomTutoringCourses.