Fairly Stock Valuation
This is a simple guidelines quoted from bloomberg businessweek.com for a stock valuation. This measurements called “Rule of 20: Is the Stock Market Fairly Valued?”
A measure of stock valuations called the Rule of 20 states that the stock market is fairly valued when the sum of the average price-earnings ratio and the rate of inflation is equal to 20. Above that level, stocks begin to get expensive; below it, they’re bargains.
So this is how we valued stock in graph :