Set out the uses of equity valuation

Equity valuation has many uses beyond picking stocks. Analysts use it to find mispriced shares, to infer the expectations built into a market price, to assess corporate events such as mergers, spin-offs and recapitalisations, to give fairness opinions to boards, to test management's strategy, to communicate with investors and to value private businesses. Reverse engineering the price is especially useful: rather than asking what a share is worth, the analyst asks what growth or return the current price requires and whether that is plausible. In a fairness opinion the question is whether the deal price is reasonable for the shareholders being asked to accept it. The trap is assuming every valuation ends in a buy or sell call.