ABSTRACT
Investment analysts need to produce estimates of what stock prices should be. Stock selection requires views as to which shares are underpriced or overpriced in the market.There are several approaches. One involves discounting prospective future dividends in order to arrive at their present value, which is regarded as the fair price of the share.Another approach obtains estimates of the price-earnings ratio and of prospective earnings and uses those estimates to ascertain the appropriate, or fair, price of the stock.
