Evaluate in the market you are in, not in the market you wish to be.
The more uncomfortable you are evaluating a company, the better the valuation is.
Numbers will always be wrong, you are trying to forecast the future, it’s not science. In science, you have an input, if you are processing it right, you will get the output right.
Valuation is not an art either - for you to be proficient with art, you are either born with it, or not. Valuation is seldom an intrinsic talent - it’s trial and error over and over again.
<aside> 🧐 Valuation is like cooking - read all the books you want, you will mess up your first scrambled eggs.
</aside>
Valuation is not that - it is a craft - you get better at it by doing it but you will never be perfect.
<aside> 💡 Look at Gamestop: The pricing was not driven by valuation, it was not reasonable - it was driven by revenge against the hedge funds.
</aside>
Finance also has a subcategory studying this - Behavioral Finance - it doesn’t affect the value of a company but only the price - but isn’t that the most important aspect of valuation?
The intrinsic value and the market pricing of a company can be very different. The market can be unreasonable, stupid even. And there is a good chance that the price never converges to our valuation result. But it is important to understand the difference.