Understanding stock valuation is a fundamental concept for beginner investors seeking to make informed decisions in the stock market. At its core, stock valuation is the process of determining the intrinsic value of a company's shares. This intrinsic value represents what the stock is truly worth, as opposed to its current market price. By understanding stock valuation, investors can identify undervalued stocks that present good buying opportunities or overvalued stocks that may not provide favorable returns. There are several methods for valuing stocks, each with its own advantages and disadvantages. The most commonly used methods include discounted cash flow (DCF), price-to-earnings (P/E) ratios, and comparable company analysis. The DCF method estimates a stock's value based on its expected future cash flows, discounted back to their present value. This approach requires a thorough understanding of the company's financial health and growth prospects. Conversely, the P/E ratio offers a simpler, quick assessment by comparing a company's current share price to its earnings per share. This method can be useful for comparing companies within the same industry.