With the Fair Value Calculator method, you invest in stocks that are actually worth more than they currently cost. However, if you buy into a currently overheated market, Fair Value stocks could suffer from a negative market environment. Especially large stocks with a high market volume have a high correlation to the development of the overall market. To improve your investment and to assess whether the market is cheap or expensive, it is worth taking a look at the here presented market watch.
Marketwatch: 0 - 0.75
Marketwatch: 0.75 - 1
The market analysis tool is used to calculate the fair value of the overall stock market. To do this, the average P/E, P/B, P/S and dividend yield of all stocks in the database are calculated. As a result, the average key figures are compared to their long-term average. The long-term averages of the key ratios are:
Long-term average P/E ratio: 17.5
Long-term average P/B ratio: 3
Long-term average P/S ratio: 1.5
Long-term average dividend yield: 5%
Since we have these ratios for more than 30,000 shares in the Fair Value Calculator database, we can compare all of these average key ratios to their longterm average. Additionally the relationship between overvalued shares and undervalued shares is determined in the database. The average of these 5 factors results in the market fair value, which is automatically recalculated daily.
A value below 0.75 is extremely cheap, a value between 0.75 - 1 neutral and above 1 is expensive.
It is therefore preferable to only put new money into the stock portfolio if the market analysis shows a value of less than 0.75. This requires a lot of patience. Historically, such a value only occurs in very weak stock markets. It can take years before such a low value is reached. You could miss out on returns in particularly strong stock market phases. Take risk out of your portfolio if the market watch is expensive and, on the other hand, use particularly favorable phases to buy more stocks.
In the Premium Tools of the Fair Value Calculator, you can view additional market data and call up the historical chart of the Marketwatch.
With the tools on this website you can find out how cheap the entire stock market, the respective industry and the individual stock is. If you invest in cheap stocks from cheap industries in a favorable market environment, there is a high probability that you will achieve extraordinarily high returns on your investments.
In the industry comparison, you can also see the average values for P/E, P/B, P/S, PEG, dividend yield and the relative strength of the respective industry. This will make it easier for you to find an industry with a favorable rating.
Disclaimers: fairvalue-calculator.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on fairvalue-calculator.com represent a recommendation to buy or sell a security. The experts may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall fairvalue-calculator.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on fairvalue-calculator.com, or relating to the use of, or inability to use, fairvalue-calculator.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. To follow the instructions on this site is no guarantee for success in the stock market. Stock investments are risky and can cause financial damage.