Couple of day’s back I got a very interesting question in my inbox from Usman a reader of eBook and blog and he asked
I am thankful to you for contacting with me efficiently,dear sir I specially request that can you help me in calculating the fair price of a share
Now first I would like to clarify that there is nothing called fair price of stock. If something is traded at price X that is actually the fair price for that stock. I know and I have my own article on DCF Method to Calculate Fair Price of Share but remember its a method based on lots of assumption of past performance but does not take much into account future news. So there is nothing on earth which can help you calculate fair share price but yes there are many theoretical algorithms which are being used to guess the fair value of equities. Remember if the above formula suggests some value as fair market does not work that way. After all its share market which does not move on maths but on sentiments and predictions. So don’t be fooled if someone or some algorithm suggests you some number as the fair price of stocks.
So now I would like to ask if you have any fair price calculator that you use. If you use it share with us in comments below.