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Jim Cramer's 'Mad Money' Recap: How to Value a Stock

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.


NEW YORK (TheStreet) -- There's more than one way to value a stock, Jim Cramer told his "Mad Money" TV show viewers Thursday. Sticking to just one of those ways will only cost you money.

Cramer said he's been racking his brain trying to figure out why some commentators hate the markets of late. But then it hit him -- valuation. There's more than one way for stocks to rise, but to many analysts and pundits there's only one way, and that's growth.

Stocks like Walt Disney (DIS) exemplify this model, said Cramer. The company has become a regular outperformer, delivering consistent growth and dividends that shareholders can depend on.

Must Read: Jim Cramer's 'Mad Money' Recap: Stocks on Sale

Contrast that to a stock like Monster Beverage (MNST), which is rising because investors are simply willing to pay more for the earnings the company already has. This is called multiple expansion, and the pundits hate it.

But stocks can be valued other ways as well, such as on enterprise value, or what another company is willing to pay on a takeover. Then there are stocks like Yelp (YELP) and Concur Technology (CNQR), which are rising on only the promise of increased sales.

Then there are the companies valued on dreams. Stocks like Tesla Motors (TSLA) and Solar City (SCTY) trade on what investors hope someday those companies will become.

Cramer said he doesn't condone all of these types of valuation, but investors still need to be aware of the many valuation models that are driving so many stocks in today's markets.

Executive Decision: Edward Lanphier

For his "Executive Decision" segment, Cramer spoke with Edward Lanphier, president and CEO of Sangamo BioSciences (SGMO - Get Report), a stock that was up 17% Thursday on positive news stemming from its clinical trials. Shares of Sangamo are up 145% since Cramer first recommended it 11 months ago.

Lanphier explained Sangamo is developing a genome editing platform that can repair or remove any gene in the body. While many of its treatments are still in Phase II testing, the prospects for HIV and genetic diseases is very exciting.

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SYM TRADE IT LAST %CHG
CSX $27.38 -1.50%
PF $44.83 -0.75%
SGMO $7.56 -3.60%
AAPL $112.77 -0.46%
FB $89.41 -1.80%

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Chart of I:DJI
DOW 16,528.03 -114.98 -0.69%
S&P 500 1,972.18 -16.69 -0.84%
NASDAQ 4,776.5080 -51.8170 -1.07%

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