Have you ever wondered why some say buy and other say sell? Seriously why is it that some analysts recommend some stocks but not others? Let us do some research and work for you to help completely explaing this very great investing question. The simple, quick, and easy answer is intrinsic value of a company. Now, I know what your thinking what in the world is this intrinsic value of a company. Well let us break it down to an average trader joe. Though using the intrinsic value, analysts are able to predict what the target price for a stock should be. And your asking well who cares about the target price of a stock or what it should be. Well, if your investing money into a stock you should care!
The target price for a stock is found by taking the market cap (the price of the stock multiplied by the number of outstanding shares) and the intrinsic value and putting them into the following formula: -((market cap-intrinsic value)/intrinsic) x 100. This formula gives the percentage of whether the company is overvalued or undervalued. This percentage is then taken and multiplied by the current stock price to get the target price. For example, if a company is trading at $50 a share, and is undervalued by 15% to find the target price, you would use the following formula: 50 x 1.15=57.5 or Current Stock Price times percent difference + current stock price= target price.