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

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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.

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), 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.

When asked about the company's finances, Lanphier said Sangamo is cash-flow positive and is very well financed thanks to its strong partnerships.

Lanphier continued that Sangamo's platform will allow for many treatments to be developed, which is why the company plans for an additional four programs to be trials before the end of the year.

Cramer said that while speculative, Sangamo is still an exciting story, and one than can cure a lot of diseases if it's successful.

Executive Decision: Michael Ward

In his second "Executive Decision" segment, Cramer sat down with Michael Ward, chairman, president and CEO of railroad CSX (CSX).

Ward painted a very optimistic picture for CSX in 2014. He said that even with $800 million of coal volume lost in the last two years, CSX has still been able to grow its other businesses faster than the decline.

One of those other businesses included intermodal cargo, where CSX ships 3.7 million containers a year. Ward said with another nine million containers still out there, the room for growth is significant.

Other positives for CSX included a renaissance in chemicals thanks to cheap natural gas, increased oil production in the Bakken shale and a pickup in autos and housing.

Yet, throughout all its growth, CSX still maintained the title of safest railroad in the U.S. Cramer said he's still a big believer in CSX.

Lightning Round

In the Lightning Round, Cramer was bullish on DuPont (DD), Whole Foods Markets (WFM), Lockheed Martin (LMT) and Huntington Ingalls (HII).

Cramer was bearish on GT Advanced Technologies (GTAT), SunEdison (SUNE) and Incyte (INCY).

Executive Decision: Bob Gamgort

For his third "Executive Decision" segment, Cramer sat down with Bob Gamgort, CEO of Pinnacle Foods (PF), home to such brands as Vlasic, Birds Eye, Mrs. Paul's and Duncan Hines. Shares of Pinnacle are up 41% since Cramer recommended it a year ago.

Gamgort said Pinnacle's mission to to reinvigorate iconic brands, making them fresh and relevant. The company accomplishes this goal by increasing productivity, which then provides it with the fuel to invest in innovation and marketing.

When asked about the move towards healthy eating, Gamgort said that 40% of what Pinnacle sells has fruits or vegetables as their primary ingredient, proving that Pinnacle is giving consumers what they want in 13 different food categories.

Turning to its acquisition strategy, Gamgort said Pinnacle looks for market leaders or brands that can become market leaders. Pinnacle looks for synergies so they can innovate and grow.

Cramer said that Pinnacle remains one of his favorites among the food stocks.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer opined on the "feel good" story that American natural gas may be able to put a damper on Russian President Vladimir Putin.

Cramer said while it's true that America has a glut of natural gas, it's also true that we simply have no infrastructure to send it anywhere and little political will to change the tide.

Cheniere Energy (LNG) will be first online with a natural gas export terminal in Louisiana, but that project's exports are already locked in for years to come.

Dominion Resources (D) is working on our nation's second export terminal in Virginia, but that project is also years away from being able to help those in Europe.

To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here.

-- Written by Scott Rutt in Washington, D.C.

To email Scott about this article, click here: Scott Rutt

Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC

At the time of publication, Cramer's Action Alerts PLUS had no positions in stocks mentioned.

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