👉 Shareholders' math, or shareholder value theory, posits that a company's value is maximized when its stock price reflects the true economic value generated for its shareholders. This means the market price of a company's shares should be equal to the sum of all its expected future cash flows, discounted back to their present value. Essentially, shareholders' math suggests that if a company is undervalued, its stock price will rise until it matches or exceeds this intrinsic value, and if overvalued, the price will fall. This theory guides investment decisions by focusing on whether a stock's current price aligns with its fundamental value, aiming to maximize shareholder wealth.
