Value Investing:

Value investing is the allocation of capital to those companies that "create value" for shareholders. This is also known as intrinsic value investing; value investing emphasis on the valuation of individual companies and seeks long term return on invested capital. Value investing is one of the valuation methods based on the discounted cash flow of free cash flow to stock holders and expected dividends to estimate the absolute intrinsic economic value of a company.

Intrinsic value or Economical Value:

It is the discounted value of the cash that can be taken out of a business during the company remaining life. The calculation of intrinsic value is very subjective due to it is sensitive to interest rates and estimation of future cash flows, So, the intrinsic value of a company is an estimation instead of a precise figure. Intrinsic economic value of a company also know as "investment value" , "indicated value", "central value", "normal value", "reasonable value", "fair value", or "appraised value".

The term value is misleading as there are various values in the market, such as market value, accounting value (or book value or net worth), economic value (or intrinsic value). Market value or capitalization of a company is calculated using the stock price multiplied by the number of shares outstanding.


Price is not equivalent to value.

Pricing and stock screening method in fundamental analysis and technical analysis is not valuation. Pricing models such as conventional academic capital asset pricing model (CAPM) using beta coefficient is measurement of investment risk but not valid in valuation model.
The methods of appraising intrinsic economic value is to selecting an appropriate discount rate and forecasts the future cash flows to calculate how much the cash returns from it internal business, this process is independent from the current market price this is why the adjective "intrinsic" is using.

Pricing and screening is not valuation. Pricing models are not valuation models.
Price Investing (Pricing Model) generally refers to the use of fundamental analysis with an emphasis on absolute book value and on comparative market value using price ratios rather than on forecasts of earnings growth rates. The pricing model involve mechanical screening of financial ratios such as price to book value or P/BV, PE ratio etc...but not the discounted cash flow.

Growth Investing normally refer to use fundamental analysis to screen out companies with growth in earning and forecasts earning growth rates instead of appraisal of value. But growth does not mean creating economic value, some growth even destroy the economic value. Any company in any industry can buy growth. In the short run this may benefit the company's customers, but in the long run it is unlikely to benefit the company's stockholders. It is often contrasted with value investing as a style, but not with value investing as an approach. The two styles are like Siamese twins joined at the hip.

Price is not value. Pricing and screening is not valuation. Pricing models are not valuation models. Model labels can be misleading. Models that appear to be valuation models are sometimes pricing models. Only a close look inside at the assumptions will reveal the type of model it is. The beta coefficient is the risk factor used the conventional academic capital asset pricing model. The use of the beta factor is not valid in a valuation model. Safety of margin refer to the difference between price and value.