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

[brianqman]

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?

 

[fergee]

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.

 

[brianqman]

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.

 

[Dona Ferentes]

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.)

 

[brianqman]

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

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.

 

[Dona Ferentes]

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

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

 

[fergee]

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?

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 at the end of the day this is your trade.

 

[MovingAverage]

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.

 

[galumay]

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.

 

[jhmtaylor]

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.

 

[dyna]

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.

 

[Knobby22]

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.

Not so unlikely now hey?

 

[ConsterMe]

I'm in the same boat as the requester here. WBC is today at $26.22. I get WBC as 61% ($16) overvalued from Simply Wall street and 8% ($28) undervalued from morning star research. So I am erring towards morning star data right now. But if I really had to take a stab at it I would average it out to around $23.

 

[Value Collector]

I'm in the same boat as the requester here. WBC is today at $26.22. I get WBC as 61% ($16) overvalued from Simply Wall street and 8% ($28) undervalued from morning star research. So I am erring towards morning star data right now. But if I really had to take a stab at it I would average it out to around $23.

In my opinion you should do your own valuations of businesses you understand, if you can’t do that then just buy the index.

 

[Value Collector]

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.

Computer generated valuations are rubbish, don’t trust them.

All valuations are simply estimates of what a rational price for a stock is, but to be able to make a good estimate of the company’s value you need to know a lot more about it that simply it’s financial statements.

You need to be able to understand the actual company and it’s assets, so that you can interpret its financial statements correctly.

so any computer program that churns out valuations based on crunching its financial statements will be wrong a lot of the time, and so will any human that tries to do the same.

Also just because a person is capable of valuing Fortescue metals, doesn’t mean they have the skills or knowledge to value CSL or Woolworths.

Each investor has a limited circle or competence, if they stray out that circle they won’t be able to make good estimates, that’s why these institutions generating analysis and reports are wrong so often, they stray outside the bounds of where they should in an attempt to generate more content.

I regularly get ask what I think of XYZ or ABC company and I always have to say “I don’t know that one or I don’t understand it” which makes me sound like I don’t know anything, but if you try and operate outside your circle you will just be doing yourself an injustice.

 

[ConsterMe]

Computer generated valuations are rubbish, don’t trust them.

All valuations are simply estimates of what a rational price for a stock is, but to be able to make a good estimate of the company’s value you need to know a lot more about it that simply it’s financial statements.

You need to be able to understand the actual company and it’s assets, so that you can interpret its financial statements correctly.

so any computer program that churns out valuations based on crunching its financial statements will be wrong a lot of the time, and so will any human that tries to do the same.

Also just because a person is capable of valuing Fortescue metals, doesn’t mean they have the skills or knowledge to value CSL or Woolworths.

Each investor has a limited circle or competence, if they stray out that circle they won’t be able to make good estimates, that’s why these institutions generating analysis and reports are wrong so often, they stray outside the bounds of where they should in an attempt to generate more content.

I regularly get ask what I think of XYZ or ABC company and I always have to say “I don’t know that one or I don’t understand it” which makes me sound like I don’t know anything, but if you try and operate outside your circle you will just be doing yourself an injustice.

I agree entirely with you. Warren Buffet has said the same of stocks that he does not know about.