You might have thought about calculating how much Microsoft’s stock should be worth and compare it to the price on stock exchange. If it only would be so easy…

Evaluating a corner store is much easier than evaluating a publicly traded company. It is not because of the size of the company, it is because of the company’s soft valuation and future valuation. Anyway, you will notice it when you give it a try. Here are three common methods you can use for your calculation:

1. Market capitalization: Market capitalization, also known as market cap, is a measure of the value of a company’s outstanding shares. It is calculated by multiplying the number of the company’s outstanding shares by the current market price of its shares. Market cap is a common way to evaluate the worth of a company, as it reflects the total market value of the company’s shares.
2. Earnings multiple: The earnings multiple is a measure of the value of a company relative to its earnings. It is calculated by dividing the company’s market cap by its earnings per share (EPS). A high earnings multiple indicates that investors are willing to pay a premium for the company’s earnings, while a low earnings multiple indicates that the company is relatively undervalued.
3. Discounted cash flow: The discounted cash flow (DCF) method is a way to calculate the intrinsic value of a company based on its future cash flows. This involves estimating the company’s future cash flows and using a discount rate to calculate the present value of those cash flows. The intrinsic value calculated using the DCF method can then be compared to the company’s market cap to determine whether the company is undervalued or overvalued.

The right method to use will naturally depend on the specific circumstances of the company and the information available.