Undervaluation and Overvaluation of Stock...

“Common sense is the heart of investing and business management. Yet the paradox of common sense is that it is so uncommon. For example, people often refer to a stock or the market level as either “overvalued” or “undervalued.” That is an empty statement. A share of stock or the aggregate of all shares in a market index have an intrinsic value, which is the sum of all future cash flows the share or the index will generate in the future, discounted to present value.