The basic concept is straightforward: If you know the true value of something, you can save a lot of money when you buy it on sale. Whether you buy a new Mobile on sale, or at Full price, you’re getting the same Mobile with all the features

Stocks work in a similar manner, meaning the company’s stock price can change even when the company’s value or valuation has remained the same.


  • Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value.
  • Value investors actively ferret out stocks they think the stock market is underestimating.
  • Value investors use financial analysis, don’t follow the herd, and are long-term investors of quality companies.


Characteristics of great value stock

  • Well-established businesses with long histories of success
  • Consistent profitability
  • Stable revenue streams
  • Dividend payments

You should research on the company by research and checking its financial metrics

  • Reading the Financial Statements
  • Finding out what it does
  • Understanding the industry – is it cheap because it is in a declining industry?
  • Identifying the potential challenges the company might be facing
  • Keeping current with news about the company

Financial Metrics

  • Price-to-Earnings Ratio
    Compare the P/E ratio with industry peer
  • Price-to-Book Ratio
    Find a stock with a P/B ratio that is less than 1. This means that it is currently priced cheaper than its equity or book value.
  • Price-to-Earnings Growth (PEG) ( P/E ratio / Earnings Per Share Growth)
    PEG looks more into future growth compared to P/E ratio which is based on historical figures.
  • Net-Net Value ( Current Assets – Total Liabilities )
    If the current assets can cover all of the company’s liabilities, the net-net value will be positive and that will be an investment worth looking at
  • Debt-to-Equity Ratio
    A company with a low debt-to-equity ratio is better for investment
  • Price-to-Free Cash Flow
    Cash is the most liquid current asset the company can have.
    Price-to-FCF Ratio = Price / Free cash flow per share
    Lower numbers indicate that a company is under priced.

Value investing strategies take time to follow, but the time and effort you spend are worth it