Elton's Equation

Elton's Equation is a method used in finance to estimate the price of a company's stock based on the value of its earnings. It relates the stock’s current price to expected future earnings, adjusted for growth and risk. Essentially, it helps investors determine if a stock is fairly valued by considering how much profit the company makes now, how that profit might grow, and the level of uncertainty involved. This approach aids in making informed investment decisions by linking earnings performance to stock valuation in a systematic way.