Fair Price and Stock Valuation Techniques Essay Example | Topics and Well Written Essays - 250 words

Fair Price and Stock Valuation Techniques - Essay Example If the estimation above were accurate, the share would be said to be undervalued by the market. The Gordon’s growth model has several weaknesses that may make the estimates not to be perfectly accurate. The model used above utilized a trend over 5 years to calculate earnings growth; this does not give a precise estimate. The data applied in the estimation stock’s value is historical (up to December 2011), the market changes from that time may have affected the share prices. The model also assumes constantly growing earnings per share; this assumption is not realistic and may over value a stock. The information used by the market in valuing the stock includes past, present and future information, whereas the model only utilizes past data. (Stoltz, 2007).   stock-analysis-on.net. GlaxoSmithKline PLC (GSK) | Present Value of Free Cash Flow to the Firm (FCFF) [Online] (Updated 2012) Available at: http://www.stock-analysis on.net/NYSE/Company/GlaxoSmithKline-PLC/DCF/Present-Value-of-FCFF [Accessed On 6 November 2012] Londonstockexchange.com. gsk   glaxosmithkline plc   [Online] (Updated 2012) Available at : http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary.html?fourWayKey=GB0009252882GBGBXSET0 [Accessed On 6 November