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ArthVed 9X Academy • Level 8 (Fundamentals + Market Understanding) • Module 28 (Pro Investor Knowledge)

Valuation Mastery
Intrinsic Value • DCF • ROE • ROCE • PEG

Valuation is the science of identifying whether a stock is expensive, cheap, or fairly priced. In this module, you will learn Intrinsic Value, Discounted Cash Flow (DCF), ROE/ROCE efficiency, PEG ratio logic, and how smart investors filter quality businesses before buying.

8
Lessons
Level 8
Investor Knowledge
Free
Access
⚠ ArthVed 9X Insight: A great company can still be a bad investment if bought at an overvalued price. Valuation protects your capital.

Module Outcomes

📌 Understand intrinsic value concept
📌 Learn DCF simplified model
📌 Understand ROE vs ROCE meaning
📌 Learn PEG ratio for growth stocks
📌 Detect overvaluation traps
📌 Learn valuation checklist of investors
Progress: 0% (Start Module)

Module 28 Lesson Map

Valuation helps investors decide if the price is justified compared to business growth and profitability.

1. What is valuation?
2. Intrinsic value explained
3. DCF explained simply
4. ROE meaning
5. ROCE meaning
6. PEG ratio explained
7. Overvalued vs undervalued
8. Valuation mistakes
🎯 Goal: Learn how investors decide fair value and avoid buying hype stocks at peak valuations.

Intrinsic Value Estimator (Simple Fair Value Model)

This is a simplified intrinsic value model based on EPS growth and expected PE.

Current EPS

20

Expected Growth (%)

15%

Estimated Fair Value

460
Fair Value = Future EPS × Expected PE

DCF Valuation Simulator (Discounted Cash Flow)

DCF estimates fair value by discounting future cash flows into today's value.

Current Free Cash Flow (Cr)

500

Discount Rate (%)

12%

DCF Fair Value (Cr)

5200
DCF is highly sensitive to growth and discount rate.

ROE vs ROCE Analyzer (Efficiency Score)

ROE shows shareholder return. ROCE shows business efficiency on total capital.

ROE (%)

18%

ROCE (%)

22%

Efficiency Rating

Strong
Higher ROCE usually indicates a better business model.

PEG Ratio Calculator (Growth Stock Filter)

PEG = PE ÷ Growth Rate. PEG helps judge valuation relative to growth.

PE Ratio

30

Growth Rate (%)

20%

PEG Ratio

1.50
PEG below 1 is considered attractive for growth stocks (not always).

ArthVed 9X Valuation Checklist (Investor Model)

Use this checklist to filter stocks like a professional investor.

✅ Revenue growth stable (3-5 years)
✅ Profit margin improving
✅ ROE above 15%
✅ ROCE above 18%
✅ Debt under control
✅ Free cash flow positive
✅ Valuation reasonable vs growth
✅ Avoid hype / narrative investing
ArthVed 9X Rule: Do not buy a stock only because "it is a good company". Buy only when price is justified.

Lesson 1: What is Valuation?

Valuation means estimating fair price of a company.

Valuation is the process of understanding what a business is worth. Markets can overprice and underprice stocks based on sentiment, hype, fear, or greed.

Valuation Answers One Question

  • Is this stock cheap?
  • Is this stock expensive?
  • Is this stock fairly priced?
ArthVed 9X Insight: Price is what you pay. Value is what you get.

Lesson 2: Intrinsic Value Explained

Intrinsic value is the true worth of a company based on its future earning power.

Intrinsic Value Depends On

  • Future earnings growth
  • Business stability
  • Market dominance
  • Profit margin expansion
  • Cash flow generation
ArthVed 9X Rule: Intrinsic value is not exact. It is a valuation zone.

Lesson 3: DCF Explained Simply

DCF values a business based on future cash flow discounted to today.

DCF Key Logic

  • Forecast cash flows for next 5-10 years
  • Discount them using discount rate
  • Add terminal value for long-term future
  • DCF gives fair value estimate
ArthVed 9X Insight: DCF is powerful but sensitive. Small input change = big valuation change.

Lesson 4: ROE Meaning

ROE shows how efficiently a company generates profit on shareholder equity.

ROE Formula

  • ROE = Net Profit ÷ Equity
  • Higher ROE = better shareholder return
  • Very high ROE may also indicate high leverage

Lesson 5: ROCE Meaning

ROCE measures profitability compared to total capital employed.

ROCE Formula

  • ROCE = EBIT ÷ Capital Employed
  • Shows business efficiency
  • Best metric to compare companies in same sector
ArthVed 9X Rule: ROCE above 18% consistently = strong wealth creation business.

Lesson 6: PEG Ratio Explained

PEG adjusts PE valuation based on growth rate.

PEG Interpretation

  • PEG < 1 = undervalued growth stock (possible)
  • PEG 1-2 = fair zone
  • PEG > 2 = expensive growth stock
ArthVed 9X Insight: PEG is useful only if growth is sustainable.

Lesson 7: Overvalued vs Undervalued

Overvaluation is not always bad, but it increases risk.

Overvalued Stock Signs

  • PE extremely high without growth
  • Stock runs faster than earnings
  • Hype-driven rally
  • Low cash flow support

Undervalued Stock Signs

  • Good growth but low valuation
  • Strong ROE/ROCE
  • Low debt
  • Strong cash generation
ArthVed 9X Rule: Buy undervalued quality. Avoid overvalued hype.

Lesson 8: Valuation Mistakes

Most investors fail because they misunderstand valuation.

Common Mistakes

  • Buying because price is rising
  • Buying because PE is low (value trap)
  • Ignoring debt levels
  • Ignoring cash flow
  • Believing DCF is exact science
  • Comparing PE of different sectors
ArthVed 9X Warning: Cheap stocks are not always undervalued. Many are cheap for a reason.

Module 28 Quiz (Valuation Mastery)

Test your valuation understanding before moving ahead.

Q1: Valuation means:
Q2: DCF is based on:
Q3: ROE measures:
Q4: ROCE measures:
Q5: PEG ratio means:
Q6: Overvalued stock risk:
Q7: Low PE always means undervalued:
Q8: Most important valuation support:
Score will appear here.
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