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Which website do I use for intrinsic value for Westpac Bank?

Discussion in 'Beginner's Lounge' started by brianqman, Jan 13, 2020.

  1. brianqman

    brianqman

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    Hi all,
    I have found various stock websites/apps give different values for intrinsic value of Westpac Bank (symbol wbc).
    For example:
    unclestock.com = $15.75
    simplywall.st = $21.21
    gurufocus.com = $20.33

    My question is simple. Which is the one I use? In other words which site is the most trustworthy and why?
     
  2. fergee

    fergee

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    You could work out the intrinsic value yourself which would be a lot of work. Or you could assign a score of trust to each of the websites valuations then aggregate them based on your scoring to reach a valuation of your own. Valuation is more art than science imho.
     
  3. brianqman

    brianqman

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    The websites have already done all the calculations for you so I wouldn't need to do it myself. I just need to know which one people use as most reliable.
     
  4. Dona Ferentes

    Dona Ferentes

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    they're all reliable. But define 'reliable'.

    Intrinsic value is .. defined to be the present value of all expected future net cash flows to the company; i.e. it is calculated via discounted cash flow valuation.

    This is from Wikipedia; it goes on to say "this is not a proven theorem or a validated theory, but a general assumption". But no-one knows the future; it is all assumptions.

    (If you are looking at WBC, it may be better to look at comparisons with other similar entities, then choose. Investing is a relative game, not an absolute one.)
     
    fergee likes this.
  5. brianqman

    brianqman

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    Reliable as in the one you would use in calculating the margin of safety and whether to buy or sell.

    The share price is 24.59 so all say it is overvalued but regardless which website/app to use as the fair value.
     
  6. Dona Ferentes

    Dona Ferentes

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    but tomorrow it will be 23.98 or 25.17, and hence it will be less or more over-valued (according to something or other)?

    Maybe the shareprice, the 'wisdom of crowds', is more accurate than some formula that necessitates other assumptions, such as inflation, interest rates and growth?

    "Short term the market is a voting machine .... but in the long term, its a weighing machine" - Benjamin Graham
     
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  7. fergee

    fergee

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    If you run with the assumption WBC is overvalued and you are planning to short sell it why dont you use $21 as take profit target#1 and $16 as take profit target#2.

    Then you can work out your position sizing and stop loss's etc based on you expected targets.

    Just my :2twocents at the end of the day this is your trade.
     
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  8. MovingAverage

    MovingAverage Smoke me a kipper

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    There are many different methods that can be used to calculate a company’s intrinsic value, which is why you’re seeing different site offer different values. The value they show will depend on what method they apply. Probably the most common method used to calculate intrinsic value is based on Discounted Cash Flow or DCF. I stand to be corrected on this but I think Simply Wall Street’s intrinsic value is based on DCF. So I think it’s not a case of asking which is the most trustworthy site but instead you need to ask what method has each of the sites used to calculate the intrinsic values.
     
    fergee likes this.
  9. galumay

    galumay learner

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    Personally I would ignore all of them, IV can at best only be a range and as soon as you see precision down to single cents, you should move on. If you dont calculate the range of IV yourself, then use a different criteria for investing. You won't have sufficient conviction in your process when you let others dictate the criteria.
     
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  10. jhmtaylor

    jhmtaylor

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    IV works best in a relatively benign stage of the market where the EPS of the stock is growing.

    Most of the banks are experiencing problems with declining ROE and EPS because of;
    • large remedial expenses arising from past wrong doing,
    • a significant increase in regulatory burden,
    • management time being directed to defensive strategies
    • an economy that has marginal growth.
     
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  11. dyna

    dyna

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    If Westpac was really headed for $20,the bravest of the brave would already be shorting the bejesus out of it,by now.But that's not happening.The market is telling me,$24 is what I have to pay.I'm still dreaming for the twenty,though. Hey,I know I'm kidding myself.Not alone,there. The experts do a lot of that,too....kid themselves.
     
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  12. Knobby22

    Knobby22 Mmmmmm 2nd breakfast

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    Not so unlikely now hey?
     
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