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Future Price Channel®

 

With the Future Price Channel® the investor knows under which level a stock is undervalued on the stock market and he knows above which level a stock is overvalued on the stock market. Therefore, for the first time, the investor has an instrument at his disposal that shows when a stock is a good buy and likewise when it is too expensive. An investor that buys quality stocks when they are fundamentally undervalued and sells them when they are fundamentally overvalued will of course systematically beat the market.

The Future Price Channel® shows the Price Increase Potential for each stock over the next 5 years. Risk can be limited by only buying quality stocks and earnings can be increased by buying stocks with the largest Price Increase Potential. The Future Price Channel® indicates at any time to what extent a stock is under- or overvalued on the stock market. The decrease or increase in the Price Increase Potential can be seen on a daily basis.

The Future Price Channel shows you the company’s stock price in relation to its Fundamental Value (channel’s axis) at any given time. You can immediately determine the stock’s undervaluation or overvaluation in proportion to the company’s results.

The Future Price Channel® forms part of the Company Reports.

Future-Price-Channel-AREAS

The lines of the Futur Price Channel®

The top line (blue): shows above what level a stock is listed too far above its fundamental value and should therefore be sold. When a stock’s price goes beyond the Future Price Channel, the stock is too expensive in relation to its Fundamental Value. At that point the stock is considered a sell, especially when trading starts to go flat. (Holding on to a stock trading above the Future Price Channel should be considered only when a strong rise in price continues.). The top line axis is assigned the value 2 in the column "Position on the Future Price Channel®" in the FVI-TOP50.

The imaginary axis: not only indicates the current value of the stock, but also the probable growth of the value of the stock over the next 5 years. The Future Price Channel® therefore shows where the stock price is at any one time compared to the current and probable future value of the stock. As such, you can immediately see when a stock is listed under or over its value. Waiting to buy until the stock is trading flat below the Future Price Channel will bring the best results.The axis is assigned the value 1,5 in the column "Position on the Future Price Channel®" in the FVI-TOP50.

The bottom line (red): shows under what level a stock is listed too far under its fundamental value and is therefore worth buying. A stock is considered a buy when it is trading below the Future Price Channel. Accordingly the stock is clearly undervalued on a fundamental basis. The bottom line axis is assigned the value 1 in the column "Position on the Future Price Channel®" in the FVI-TOP50.

The stock price moves up and down

It is assumed that the stock price increases at the same rate as the EPS into infinity.

However, the stock price moves up and down. During certain periods the stock price will increase faster than the EPS. The stock price could then reach a level that is much higher than the fundamental value of the stock.

Sometimes the price reaches a level that is fundamentally unjustified. In certain cases, this level could be sustained for some time, but the prices will ultimately always make their way back to their fundamentally justified value. If the prices are far above their fundamentally justified level then they are of course very vulnerable. A lower than expected earnings growth or a small earnings decrease would then be enough to make the price of a quality stock plummet.

In other periods the price may fall to a level that can no longer be fundamentally justified. Sometimes a stock can loose its popularity and stay listed at too low a level for years. At a certain point the listings of such stocks, however, manage to rise back to their fundamentally justified level.

Free examples

Consult the free examples on our publication website IRvalue.com.