Stock Price Hypothesis
Market School: Sentiment, Psychology, Mood Swings
Stock Price
= EPS × P/E
P/E is determined by the mercy of guessed work of the market which is influenced largely by the Institutional Analysts who guess.
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Growth School: Peter Lynch
Stock Price
= EPS × Growth
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Return on Invested Capital School (Return Opportunity Perspective): Warren Buffett, Charlie Munger, Joel Greenblatt, Li Lu
Stock Price
= EPS × ROIC
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Inverse of Invested Capital Cost School (Cost Risk Perspective): Bruce Greenwald
Stock Price
= EPS × 1/Invested Capital Cost Ratio
= Earnings Power Value
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Inverse of Long Term Corporate Bond Rate School (Cost Risk Perspective): Peter Cundill
Stock Price
= EPS × 1/Long Term Corporate Bond Ratio
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Investors shall apply certain MOS to the Stock Price being derived by their best perception.