Topic 42. Valuation of securities

Equity securities (stock). Estimation is associated with the life cycle (release, placement, circulation)

1) First stock valuation - upon issue (nominal valuation) - the value indicated on the letterhead of the share (characterizes the share of the authorized capital per 1 share at the time of establishment). UK JSC = the sum of the par values ​​of the shares.

2) Second assessment - in case of their initial placement - issuance valuation - the price at which it was acquired by the first holder. Under the law, the issue price is greater than or equal to the nominal value (equal to the establishment).

For subsequent issues, valuation at the issue price oriented to the market (Share premium = issue price - nominal). Share premium goes to equity.

3) 3rd stage of emission - the prospect of selling shares is determined - market valuation (required when transforming an OJSC into a CJSC, purchasing a voting stake, issuing a loan secured by shares).

Market value - the price at which the seller, who has complete information and is not obliged to sell, and the buyer under the same conditions, would agree to buy. The market price of a share is the value in current prices for transactions concluded at any given time.

Market (exchange) price - at which shares are bought and sold on the secondary market. It is installed at the auctions of the stock exchange. Reflects the actual price of the stock, subject to a large volume of transactions. This is the price of execution of transactions, the price of real sale = dividend / loan interest * 100%

4) in valuation, book value = total assets / assets in circulation is important. It is determined by experts for investment, audit check - during listing, liquidation.

5) Cost estimate - based on indicators characterizing its quality:

A) P/E = current market price / earnings per share E = earnings / number of outstanding shares

Used to compare the value of comparable securities. If the P / E is high, then the stock may be overvalued and the price underestimated.

B) D/P = dividend per common share / current market price per common share - shows the current market return on the stock.

C) D/E = dividend per share / earnings per share. If low, then the company's profitability is high, the prospect of its growth.

Bonds (debt securities). Evaluation 1) at face value - on the balance sheet, that is, the amount that is borrowed and is subject to return upon the expiration of the loan. It is the base value. Usually the bond is issued with a high face value (for wealthy investors), the redemption of the bond is at a fixed nominal price. 2) Issue price - market price at the time of issue, m.b. above, below and equal to the face value. 3) market - based on the situation in the financial market + the proximity of the maturity date (the closer, the higher) + the right to a regular fixed income (the higher, the lower) + the reliability of investments (degree of risk).

4) Market price = market price of a bond / nominal price of a bond (used when comparing market prices of bonds with different denominations).

Authors: Shevchuk D.A., Shevchuk V.A.

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