how do I determine if a company is value or growth?

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LearningAlot
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how do I determine if a company is value or growth?

Post by LearningAlot » Thu Nov 08, 2018 6:36 am

I am trying to educate myself on the concept of value investing and realized I could not answer some basic questions and
was hoping someone could point me in the right direction.

Are there generally accepted rules that govern whether a company is classified as value or growth. Is there a list that is available to find out how a company is classified? How many US companies are considered value vs growth? Does the classification change much? Is it binary or are some companies kind of in the middle, while some are strongly value and others are strongly growth.

Thanks in advance!

The Wizard
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Re: how do I determine if a company is value or growth?

Post by The Wizard » Thu Nov 08, 2018 6:54 am

See if the company pays regular dividends or not. Dividends imply a value company.
See which value or growth tilted funds hold that company as well...
Attempted new signature...

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BeBH65
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Re: how do I determine if a company is value or growth?

Post by BeBH65 » Thu Nov 08, 2018 7:03 am

LearningAlot wrote:
Thu Nov 08, 2018 6:36 am
Are there generally accepted rules that govern whether a company is classified as value or growth.
There are many alternative ways of determining if a company is Value or Growht; with sometimes conflicting outcome.
- If you seacrh on the Morningstar site you can find how they do it.
- if you search on "Fama & French" or "Value factor" you will get another calculation
- ...

The Wizard wrote:
Thu Nov 08, 2018 6:54 am
See if the company pays regular dividends or not. Dividends imply a value company.
See which value or growth tilted funds hold that company as well...
Sorry this is not a sufficient criteria.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

Grt2bOutdoors
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Location: New York

Re: how do I determine if a company is value or growth?

Post by Grt2bOutdoors » Thu Nov 08, 2018 7:16 am

Growth - high p/e
Earnings growing at faster than industry pace
High Book to market value


Value - low p/e
Earnings are growing slowly
Low Book to market value
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

snailderby
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Re: how do I determine if a company is value or growth?

Post by snailderby » Thu Nov 08, 2018 7:19 am

1. There isn't only one way to determine value, but three commonly used criteria are (1) price to book, (2) price to earnings, and (3) price to sales. See https://us.spindices.com/indices/equity/sp-500-value. I think Fama & French focused on the price to book ratio in their initial research, but I'm not 100% sure about that.

2. How "valuey" a company is in real life is not binary. (A company can be somewhat valuey or really valuey and every shade in between.) But many (though not all) value indexes simply split the universe of stocks into roughly two halfs (by market cap? by number of stocks? not sure) in constructing the index. See https://www.etf.com/sections/etf-strate ... deep-value.

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vineviz
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Re: how do I determine if a company is value or growth?

Post by vineviz » Thu Nov 08, 2018 8:36 am

snailderby wrote:
Thu Nov 08, 2018 7:19 am
2. How "valuey" a company is in real life is not binary. (A company can be somewhat valuey or really valuey and every shade in between.) But many (though not all) value indexes simply split the universe of stocks into roughly two halfs (by market cap? by number of stocks? not sure) in constructing the index. See https://www.etf.com/sections/etf-strate ... deep-value.
I think it’s also helpful to remember that “growth” and “value” are not inherently mutually exclusive.

Although companies with high growth rates don’t USUALLY trade at low valuations, it’s not impossible. Most “blend” funds hold stocks that have both value and growth characteristics, for the instance.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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