How to find a Stock's Right Price?

4.2.2. Valuation for a bank

In case of banks, interest incomes and interest costs are more or less similar across all banks.

As we know bank's business is different than other businesses because all the assets and liabilities are financial in nature. It makes its book value more important than its earnings for its assessment.

Here again, the MRP is determined by two factors

‘Present Value of Future Dividends’ – This is the income earned as Dividend during the holding period of a stock, discounted to its present value.
'Present Value of Future Price'- Expected stock price at the time of sale, discounted to its present value.

Here’s how the MRP is calculated:

To calculate MRP, we first need to know the Future Price. Future Price is calculated by the formula

The Future BVPS is calculated by the formula

expected BVPS growth rate

expected BVPS growth rate.

The Future Price-to-Book Value Ratio is calculated by the team of experts at MoneyWorks4me through a thorough study of the historical trends of P/BV ratios as well as dividends.
Now that we have done the first part, i.e. calculating the Future Price, we move to the second part in the calculation of MRP which is calculating the Present Value of Future Dividends. Here, the Future Dividends per Share are calculated by a team of experts from MoneyWorks4me and then are discounted at an appropriate rate of discount.
Now that we know the Future Price and the Present Value of Future Dividend, we go on to calculate the MRP. The MRP, as discussed previously, is calculated on Present Value of Future Dividends and Present Value of Future price. Thus, MRP is calculated by the formula :

So to summarize, to calculate the MRP of a bank we need :

Current BVPS (which is known)
Expected BVPS Growth rate (which is calculated by the team of experts at MoneyWorks4me)
Expected Rate of Return (which is calculated by the team of experts at MoneyWorks4me)
Future P/BV (which is calculated by the team of experts at MoneyWorks4me)
Present Value of Future Dividend per share (which is calculated by the team of experts at MoneyWorks4me)

MoneyWorks4me has a team of experts who exhaustively research banks before providing MRP and Discount Price.

The research includes a thorough quantitative as well as qualitative stock analysis.
The quantitative equity analysis includes scanning through historical data of each company. This is followed by a study of the future prospects of the company.
The two combined together with our model based on Expected Book Value growth rate, Future P/BV & dividend discounting helps us derive an MRP & Discount Price for each stock.

Build a Stress-Tested Portfolio.

Our Sapphire Advisory uses the ABC Concept to ensure you never have to panic during a market correction.

Core Stocks

STABILITY

Booster Stocks

GROWTH

Amplifier Stocks

ASYMMETRY

● Conflict-Free ● SEBI Registered ● 15Y+ Track Record

Related Links :

Need Help

Introduction

How it Works?

Features Usage Guide

Glossary

How to find a Stock's Right Price?

4.2.2. Valuation for a bank

MoneyWorks4Me Premium

Follow us at

MoneyWorks4Me

About MoneyWorks4Me

Our Vision

What Makes MoneyWorks4Me Different

Our Approach: Ensuring compounding work its magic on client portfolio.

Name of the IA registered with SEBI:	The Alchemists Ark Pvt. Ltd.
Logo:
Trade/Brand Name of IA:	MoneyWorks4Me Investment Advisers
Brand Logo:
SEBI Registration Number:	INA000013323 Validity – May 16, 2019 – Perpetual
Registration:	Non-Individual
BSE Enlistment No:	1187
Address:	B-101, Signet Corner Building, Balewadi Phata, Baner, Pune, Maharashtra 411045
Compliance officer Details:	Name: Shrikant Jagtap Email: shrikant.jagtap@moneyworks4me.com Telephone: +919860359463 Address: Same as IA
Grievance Officer Details:	Name: Mukta Vaze Email: mukta.vaze@moneyworks4me.com Telephone: +91 98609 19463 Address: Same as IA
Principal Officer Details:	Name: Atharva Bhide Email: atharva.bhide@moneyworks4me.com Telephone: +91 91758 99463 Address: Same as IA
Standard Warning:	Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Disclaimer:	Registration granted by SEBI, enlistment with exchange and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.