I was just thinking, and realised I don't actually know how to properly value a stock as the market does.
“As the market does” what do I mean by this
Let's say I have my own model/prediction about a growth stock, that in exactly 10 years will completely stop making progress, and will just keep making the same amount of money.
I'm a long term investor, I will predict future revenues – profits, because If the stock stops growing according to my thesis, nothing changes, then revenue doesn't matter – margin won't change it will all magically just become static and flat, profits is the only thing that stays the company's asset the way I see it in this hypothetical made up scenario.
So then, I'm left with this model, that will value a stock based on profits the company will be making in 10 years, what value could that be according to the market ? If the company pay a dividend, is that gonna be the factor that defines the company's value, either dividend, wasted investments, or investments into growth, so it becomes more of a growth stock again, unless it becomes a dividend, so is this whole thing about dividends ? Because why would I buy a stock if it doesn't make me money
How do I convert dividends into stock value ? What has the market usually agreed upon on average ?
I may sound confused because I'm
Don't want to start arguments here, If I just forget about P/E ratios and why this should have a P/E of 20 and that of 40 and stuff that makes little sense to me (yeah kinda works sometimes, until it doesn't), it all looks like some sort of ponzi scheme or something, like all imaginary, no real way to value a stock, just human psychology, so now I'm totally confused about how to value anything, money isn't real
Anyone got some clarity to this ? What am I missing or not undersanding
What I forgot to ask about the dividends was, is it like, is there like a formula agreed upon that say some shit like 10 years * dividends$ * some number = value, even though it may still fluctuate and not be in total corellation to the conventionally agreed value because of human emotions, or further made up predictions about the company's future and it's ability to pay more or less dividends, without all the noise, just pure signal, what is a value of a stock conventionally ?
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