Question

“Corporate valuation is not an exact science because sometimes value is in the eye of the beholder”. Explain this statement.

Answer 1

Corporate valuation is not completely science because sometimes, it is an art to identify various companies and it is also uniqueness of an individual to identify certain company because there are companies which can not be suitable for investment for a particular individual based upon certain Matrix whereas there are certain other individual who have different type of metrics for investment.

For example, there is always an avoidance of Penny stocks in the market because they are believed to be a wealth destructor but there are various investors who has made an empire out of buying the Penny stocks because they have bought this Penny stocks at such throw away prices that even if they are providing a little bit of profit these investment has grown multifold,so it is all about the perspective of the investor in a relation to the investment into various stocks, so it is about the individual choices and uniqueness about the investment strategy that it will help the investor in order to invest rather than following some rule so it is related to the particular investor a specific investment strategy also rather than the core investment principles of the books.