From: sravan bunty on
As a share or stock is a representation of partial ownership of a
company that is publicly traded,
its price can be significantly affected by the change in the market
conditions.
Thus, it represents the share in the company's revenue, earnings,
cash flow, shareholders' equity, etc. However,
an investor invests in stocks with the objective of earning good
dividends or returns out of it. Therefore, it is essential for an
investor
to correctly value the stocks of a company before taking any
decision. According to Warren Buffett,
"it's far better to buy a wonderful company at a fair price than a
fair company at a wonderful price.

http://www.thewondersonline.com/Valuation-Of-Stocks.htm