I would like to hear some of the experts input on this (current 3rd year and curious over this while studying for valuation exam.)
Think of yourself as a consultant for a company that is micro cap size (assume management is not incredibly sophisticated or financially savvy.) You propose an intrinsic value of the stock's price that is under or overvalued to the market. Obviously there are a number of reasons to cause this, but I would like to hear some your responses. There is some disconnect between the firm and the market-- either the information is not being communicated or investors have employed the information to their own models and simply disagree. Offer any advice one might give to the owner.
Furthermore, what are some of your recommendations to do if you are management for when you're stock is a) undervalued or b) overvalued.
If overvalued in the market does it make sense to seek out a company to acquire through an equity swap?
If undervalued are there better alternatives to buying back?
And because I know it's coming, I am not asking you to write my essay. I actually have no clue if this will actually appear on the exam, but while studying I have grown curious and I'm sure the vast number of users on here that are students can benefit as well. Thanks for all input.
