Value investing with example

Dear Investors,

As a part of learning series, we are presenting you what is value investing and how to identify the value stock to invest. This information is to educated individual investors to make a wise decision. there will be lot of other factors which will effect the value of stock.

Lets look into the details what is value investing:

Simple example buying a asset with less amount that it is really worth of. simple example of better understanding. If you are buying a asset for $50 and its really worth more than $50. There might be chances that other factors might change the worth of the asset. we all know that Warren Buffett is the most famous value investor.

some important ratios:

Debt to Equity Current Ratio:

Price to Book Ratio

EPS

Lets take example of Tata Steel stock and check these basic things to make sure whether stock is good value to buy or not at current price (Rs/- 346.85), This information we can find for company financial reports.

	Mar 2011	Mar 2010	Mar 2009	Mar 2008	Mar 2007
Debt Equity Ratio	0.59	0.68	1.34	1.08	0.69
Book Value	503.19	418.94	331.68	298.78	240.78
Earnings Per Share	71.58	56.37	69.70	63.85	72.74

There are other factors such as Return on Equity (ROE), P/E & demand for company products/services, competition and price war...

 But if we look at Tata steel at current price levels its trading at less than book value and Debt to equity ration gone below. Earning per share is up. in 2009 & 2008 Debt to Equity ratio was high due to loans for acquisitions but management seems to paid part of the loans. At current levels its a very good buy for value investors.

Current Price: 346.85/-
Book Value: 503.19/- (as per Mar 2011 records) for latest value you can checkout latest quarterly balance sheet.
Debt Equity Ratio: 0.59