Andy Egwim explains why paying £50 per share for a company worth £5 per share in book value is a bad deal. You need to know the intrinsic value before you buy, or you're just guessing at the price.
If you're not going to buy for 50 million, does it make sense to buy the shares of the company for £50? No.
No.
So you don't buy for £50, okay.
Because currently the share is £5, isn't it? Each share costs £5, isn't it? £50. So you're still going to buy 10 times what it was. So you're indirectly buying it at the price she's trying to sell it.
That's a very good important point. But the value, the book value is £5. But somebody is selling for £50, so it's costing £50. That's the cost to buy it. But the value according to the intrinsic value. The book value. Intrinsic value is more than book value. But book value is a good place to start. The book value is £5, which is 5 million. Why I started from this angle is that it should make you realize that when you're buying a company, it doesn't matter if it's. If you're selling it for $50, you have to think about it from. But what does that 50 really mean for you to know that you have to know the shares outstanding and you need to know the book value.
