Research a Stock's Valuation
Learn how to analyze if a stock is overpriced, underpriced, or fairly valued.
⏱️ Time: 10-15 minutes 📱 Platform: iOS & Web 👤 Best for: Anyone researching potential investments 🦍 Recommended Companion: Sage (fundamental analysis focus)
What You'll Learn
How to determine if a stock is expensive or cheap
How to use valuation metrics (P/E, PEG, Price-to-Sales)
How to compare a stock to its peers and history
How to make informed buy/sell/hold decisions
Step 1: Discover a Stock
Through Social Media or News
On iOS/Web:
See a stock mentioned on Reddit, Twitter, or news
Note the ticker symbol (e.g., TSLA, AAPL, NVDA)
Find the Stock in Ape AI
Option 1: Search
Tap Search icon (🔍) at top
Type the ticker or company name
Tap the result
Option 2: Through Discovery
Go to Discover tab
Browse Banana Bites for trending stocks
Tap on a story to see the ticker
Option 3: From Chat
Mention the ticker in chat: "Tell me about $TSLA"
Tap the ticker link in AI response
Step 2: View the Ticker Page
Initial Overview
When you open the ticker page, you'll see:
Header Section:
Company logo and name
Current price and change
Market status (Open/Closed)
Volume traded
Price Chart:
Historical price movement
Time periods: 1D, 1W, 1M, YTD, 1Y, 5Y, All
Interactive chart
Market Stats:
52-week range
Market cap
P/E ratio
Average volume
💡 Quick check: Is the current price near the 52-week high or low?
Near high = Recently strong, potentially expensive
Near low = Recently weak, potentially cheap
Middle = Neutral positioning
Step 3: Click "Pricey or Cheap" Prompt
Access Valuation Analysis
On Ticker Page:
Scroll to "[Company]'s Story" section
You'll see 4 analysis cards:
💰 How It Makes Money
📈 Why It Could Pop or Drop
⚠️ Bagholder Risks
💵 Pricey or Cheap ← Click this one
Tap "Pricey or Cheap"
What You'll See
The AI generates a comprehensive valuation analysis including:
Current Valuation Metrics:
P/E Ratio (Price-to-Earnings)
EV/EBITDA (Enterprise Value multiple)
Price-to-Sales ratio
FCF Yield (Free Cash Flow)
PEG Ratio (P/E to Growth)
Historical Comparison:
Current vs 5-year average
Current vs 10-year average
Trend direction
Peer Comparison:
How it compares to sector average
How it compares to similar companies
Relative positioning
Conclusion:
Clear verdict: Expensive, Fairly Valued, or Cheap
Reasoning for the conclusion
Context and caveats
Step 4: Show the Chat Result
Understanding the Analysis
Example for TSLA (Tesla):
What This Means:
Expensive = Currently overvalued, risky entry
Fairly Valued = Reasonable price, balanced risk/reward
Cheap = Potentially undervalued, better entry opportunity
Step 5: Ask Follow-Up Questions
Deep Dive with Sage
After reading the valuation analysis, ask Sage for clarification:
Understanding the Metrics:
Getting Context:
Comparing Alternatives:
Sage's Follow-Up Analysis
Example Response:
Understanding Valuation Metrics
Key Metrics Explained
1. P/E Ratio (Price-to-Earnings)
What it is: Stock price ÷ Earnings per share
How to interpret:
Low (< 15): Potentially undervalued or slow growth
Medium (15-25): Fairly valued
High (> 25): Expensive or high growth expected
Very High (> 50): Speculative, risky
Limitations:
Doesn't work for unprofitable companies
Varies wildly by industry
Can be manipulated with accounting
💡 Tip: Always compare to industry average and company's history!
2. PEG Ratio (P/E to Growth)
What it is: P/E ratio ÷ Expected growth rate
How to interpret:
< 1.0: Undervalued relative to growth
1.0-1.5: Fairly valued
> 2.0: Overvalued relative to growth
Example:
3. Price-to-Sales
What it is: Market cap ÷ Annual revenue
When to use:
Companies not yet profitable
Comparing growth stocks
Tech/biotech sectors
How to interpret:
< 2: Cheap
2-5: Reasonable
> 10: Expensive, growth expected
4. EV/EBITDA
What it is: Enterprise Value ÷ Earnings before interest, taxes, depreciation, amortization
Why it's useful:
Accounts for debt
Better for comparing companies
Used by professional investors
How to interpret:
< 10: Potentially cheap
10-15: Fairly valued
> 20: Expensive
5. FCF Yield (Free Cash Flow)
What it is: Free cash flow ÷ Market cap
Why it matters:
Shows real cash generation
Better than earnings (can't fake cash)
Indicates financial health
How to interpret:
> 5%: Strong value
2-5%: Reasonable
< 2%: Expensive or high growth
Comparing to Peers and History
Peer Comparison
Ask Sage:
What you'll get:
P/E
30.2
35.1
25.3
28.7
22.5
P/S
7.8
12.3
6.1
8.9
5.2
PEG
1.8
2.1
1.5
1.9
1.7
FCF Yield
4.2%
3.8%
5.1%
4.6%
3.9%
Analysis:
Historical Comparison
Check valuation trend:
Response:
Making the Decision
Decision Framework
After analyzing valuation, use this framework:
Scenario 1: Stock is CHEAP
P/E below historical average
Trading near 52-week lows
Peers more expensive
Your options:
✅ Buy: If fundamentals still strong
⚠️ Research why it's cheap: Value trap?
✅ Watch: Add to watchlist, wait for catalyst
Scenario 2: Stock is FAIRLY VALUED
P/E near historical average
In line with peers
No major red flags
Your options:
✅ Buy small position: If you like the story
✅ Dollar-cost average: Buy gradually
✅ Wait for dip: Better entry later
Scenario 3: Stock is EXPENSIVE
P/E well above average
Premium to peers
Near 52-week highs
Your options:
⚠️ Buy only if very bullish: Higher risk
⚠️ Smaller position: Reduce exposure
✅ Wait for pullback: Patience pays off
✅ Look for alternatives: Cheaper options
Real-World Examples
Example 1: Finding Value
Stock: Ford (F)
Example 2: Growth Premium
Stock: NVIDIA (NVDA)
Example 3: Bubble Warning
Stock: Speculative Tech Co
Advanced Valuation Techniques
DCF (Discounted Cash Flow) Analysis
Ask Sage:
Sage's DCF breakdown:
Sum-of-Parts Valuation
For conglomerates or multi-business companies:
Red Flags to Watch For
Valuation Red Flags
❌ P/E over 100 with slowing growth
Disconnect from fundamentals
Bubble risk
❌ Price-to-Sales over 20 for mature company
Unless hyper-growth (>50%/year)
Unrealistic expectations
❌ Trading at 3x historical average with no change
No fundamental improvement to justify
Mean reversion likely
❌ Massive premium to peers with similar business
Unjustified valuation gap
Competition will compress multiples
❌ Negative free cash flow with high valuation
Can't sustain without funding
Dilution or debt risk
Quality Red Flags
❌ Deteriorating margins
Pricing power loss
Competition increasing
❌ Slowing revenue growth
Business maturation
Market saturation
❌ Increasing debt
Financial stress
Interest burden
Common Mistakes to Avoid
❌ Don't Do This
1. Using P/E alone for decision
Look at multiple metrics
Consider growth and quality
Compare to peers and history
2. Ignoring the business quality
Cheap can be a value trap
Quality companies deserve premium
Bad business at any price is expensive
3. Buying just because it's "cheap"
Understand WHY it's cheap
Is it fixable or terminal decline?
Cheap can get cheaper
4. Avoiding expensive stocks completely
Growth can justify high multiples
Best companies often expensive
Consider PEG ratio, not just P/E
5. Focusing only on valuation
Technicals matter too
Sentiment drives short-term price
Catalysts create opportunities
What's Next?
After Your Research
If Stock is Cheap and Quality:
If Expensive but Love the Story:
If Unsure:
Keep Researching
Expand your analysis:
Success Checklist
✅ I found the ticker page
✅ I read the "Pricey or Cheap" analysis
✅ I understand the key valuation metrics
✅ I compared to peers and history
✅ I know if it's expensive or cheap
✅ I understand WHY the valuation is where it is
✅ I made an informed buy/wait/pass decision
Remember: Price is what you pay, value is what you get. Never overpay for an asset, no matter how much you love it. Patience in finding good value is what separates successful investors from the rest! 💎
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