06/25/2026
If you’ve ever walked into a store, looked at a price tag, and thought, "There is no way this shirt is worth $80," you already understand the basics of Valuation.
In the stock market, Valuation is just the professional term for figuring out what a company is actually worth, so you don't overpay.
A stock's Price goes up and down every second based on excitement, news, and panic. But a company's Value is based on real-world math: its sales, its profits, and its future potential.
When investors look at a stock, they use valuation to put companies into three categories:
❌ Overvalued: The hype is too high; the price is way more than the company is worth.
🤝 Fairly Valued: The price is exactly right for what the business is doing.
✅ Undervalued: The company is a hidden gem trading at a discount.
The ultimate goal of valuation is to find a Margin of Safety. If your math tells you a stock is truly worth $100, but fear in the market has pushed its price down to $70, you’ve found a bargain. That $30 discount is your safety cushion!
🏷️ Price is what you pay. VALUE is what you get.