CHAPTER 5
Valuation Based on Securities Prices
Financial markets should not be treated as a physics laboratory but as a form of history.
—George Soros, “Anatomy of a Crisis” April 9, 2010 (at King’s College, Cambridge)
TO ESTIMATE THE VALUE of a company’s securities, investors can study its assets, earnings, and cash flow—the subjects of our opening chapters. But another indicator of securities’ value—a deceptively simpler one—is their current price: the dollars and cents that other investors are willing to pay for them right now on the open market. This chapter is for prospective investors who already know about a company’s financial statements but who want to glean information from current stock prices as well.
It may seem obvious at best—and ...
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