Professors’ Website Teaches Stock Valuation 101
Oct. 27,2000
University Park, Pa. -- A group of professors of finance in Penn State’s Smeal College of Business Administration have developed a new Internet website that helps investors calculate a stock’s value. Valuepro.net offers a free sophisticated calculator that allows investors to work through their own valuation of any stock.

Valuepro.net (http://www.valuepro.net) was created by Dr. J. Randall Woolridge, professor of finance; Dr. Gary Gray, a visiting professor of finance at Penn State and former manager director of a major Wall Street investment bank; and Dr. Patrick J. Cusatis, a visiting associate professor of finance at Penn State and a Vice President of Tucker, Anthony & Co., an investment bank.

The valuepro.net approach uses a discounted cash flow (DCF) technique to value common stock. DCF techniques are used by investment bankers for merger and acquisition analysis, Wall Street traders to value all types of debt obligations, and Wall Street analysts to value stock.

The value of any investment is equal to the expected cash flows of the asset, discounted for timing and risk, Woolridge explains. Future cash flows for common stock can come from dividends, from the sale or merger of the company (e.g. Yahoo's offer for the purchase of Geocities.com stock), from the repurchase of the stock by the company (e. Microsoft and Intel have large share repurchase programs), or from the sale of the stock at market prices.

"At the website, all you do is enter the stock symbol for the stock in which you are interested, click on the Get Baseline Valuation Button, and we do the rest. The inputs used to value the stock are from a reliable source and are updated periodically. You can change any input, hit the Recalculate Button, and recalculate a stock value," explains Woolridge. "Our goal is to demystify the stock valuation process, make stock valuation easier to understand, and show investors how to make money in the stock market by purchasing ‘undervalued' stocks and selling ‘overvalued' stocks."

The free website is the valuation model described in a book the professors recently co-authored, The StreetSmart Guide to Valuing A Stock: The Savvy Investor’s Key To Beating The Market.  

"With the complexity and volatility of today’s stock market, persons planning to invest need to empower themselves to survive the daily ups and downs,î says Woolridge. In their book, the authors chose a simple, four-step valuation approach that can be applied to most stocks. The book outlines those four steps as: forecast expected cash flow; estimate the discount rate; calculate the value of the corporation; and calculate per share intrinsic stock value.

"Most people are perplexed with how to value a common stock and the recent fluctuations in the market add to the confusion. We focus on the art and science of stock valuation in the book and how a person can make profitable use of valuation in their investment decisions. The Internet website is a companion piece to the book," he says.

Woolridge notes that the target audiences are those sub-sets of investors that are participants, but are not ‘experts’ or rank beginners, in the stock market.

"We believe that individual investors, investment club members, stock brokers, investment advisors, corporate managers, and corporate consultants or ordinary people that just want to learn about stock valuation all are ideal candidates to use valuepro.net," notes Woolridge.

Editors: For more information on the website, you can reach Woolridge via e-mail or by phone at
814-865-1160.