Fair Value & DCF Model
Cost of Debt (Premium Plus)
Chartable: No
Unit: Percentage
Effective interest rate on debt. Lower rates indicate strong credit quality.
Cost of Equity (Premium Plus)
Chartable: No
Unit: Percentage
The CAPM (Capital Asset Pricing Model) determines the cost of equity for stocks. It gives higher-beta stocks a higher cost and is used to determine a Weighted Average Cost of Capital.
How to use it: The cost of equity is typically higher than the cost of debt because equity holders bear more risk.
Debt Percent (Premium Plus)
Chartable: No
Unit: Number
The percent of a company’s enterprise value that comes from debt as opposed to equity (shares). Used in WACC calculations.
Equity Percent (Premium Plus)
Chartable: No
Unit: Number
The percent of a company’s enterprise value that comes from equity (shares) as opposed to debt. Used in WACC calculations.
Fair Value (Premium Plus)
Chartable: No
Unit: Number
We compute the Fair Value of a company by using a discounted cash flow analysis to determine the Intrinsic Value. We then rank firms in each Sector by their Intrinsic Value to find a value that is well suited to current market multiples. Over the long term our Fair Values will imply a 30% drop in price for the worst stocks and a 45% gain for the best stocks.
Fair Value (Academic) (Premium Plus)
Chartable: No
Unit: Number
We compute the Fair Value (Academic) of a company by using a discounted cash flow analysis with the academic formula for Intrinsic Value that forecasts cashflows into perpetuity. We then rank firms in each Sector by their Intrinsic Value to find a value that is well suited to current market multiples. Over the long term our Fair Values will imply a 30% drop in price for the worst stocks and a 45% gain for the best stocks.
Fair Value (EV / Sales) (Premium Plus)
Chartable: No
Unit: Number
Fair value determined by ranking stocks in a sector by their EV/Sales ratios. It is a fallback when the discounted cash flow analysis cannot be calculated. Over the long term this value will imply a 30% drop in price for the worst stocks and a 45% gain for the best stocks.
Forward EBITDA Growth (Premium Plus)
Chartable: No
Unit: Number
Estimated EBITDA growth for next year based on analyst estimates.
Industry Historical Multiple (Premium Plus)
Chartable: No
Unit: Number
Long-term average EV/EBITDA for profitable companies in this industry. For financial services, P/E is used instead.
Intrinsic Value (Academic) (Premium Plus)
Chartable: No
Unit: Number
The intrinsic value of a company determined by adding the Net Present Value of Cashflows and the Terminal Value (Academic). The intrinsic value can vary greatly from the stock market valuation of a firm. Warren Buffett has been known to apply as much as a 50% discount to the intrinsic value of a stock as his price target.
Intrinsic Value EV to Sales (Premium Plus)
Chartable: No
Unit: Number
Intrinsic value from comparing EV/Sales to industry norms.
Intrinsic Value Exit Multiple (Premium Plus)
Chartable: No
Unit: Number
The intrinsic value of a company determined by adding the Net Present Value of Cashflows and the Terminal Value Exit Multiple. The intrinsic value can vary greatly from the stock market valuation of a firm. Warren Buffett has been known to apply as much as a 50% discount to the intrinsic value of a stock as his price target.
Margin of Safety (Premium Plus)
Chartable: No
Unit: Percentage
The percentage between DCF-derived Fair Value and current price. The most comprehensive single valuation metric — the final output of detailed DCF analysis.
General benchmarks: Positive = undervalued; negative = overvalued. Many value investors require 20%+ margin.
Margin of Safety (Academic) (Premium Plus)
Chartable: No
Unit: Percentage
Margin of safety using the academic (perpetuity) DCF method. Higher confidence when this matches the exit-multiple version.
Margin of Safety EV to Sales (Premium Plus)
Chartable: No
Unit: Percentage
The percentage difference between a firm’s fair value (as determined by the EV/Sales ratio) and its current price. A higher margin of safety is better, but this valuation method is imprecise as it uses very generalized criteria.
Model FCF Y1 (Premium Plus)
Chartable: No
Unit: Millions of Dollars
Projected free cash flow for 1 year ahead, from discounted cash flow analysis using analyst estimates and historical growth rates.
Model FCF Y2 (Premium Plus)
Chartable: No
Unit: Millions of Dollars
Projected free cash flow for 2 years ahead, from discounted cash flow analysis using analyst estimates and historical growth rates.
Model FCF Y3 (Premium Plus)
Chartable: No
Unit: Millions of Dollars
Projected free cash flow for 3 years ahead, from discounted cash flow analysis using analyst estimates and historical growth rates.
Model FCF Y4 (Premium Plus)
Chartable: No
Unit: Millions of Dollars
Projected free cash flow for 4 years ahead, from discounted cash flow analysis using analyst estimates and historical growth rates.
Model FCF Y5 (Premium Plus)
Chartable: No
Unit: Millions of Dollars
Projected free cash flow for 5 years ahead, from discounted cash flow analysis using analyst estimates and historical growth rates.
Net Present Value of Cashflows (Premium Plus)
Chartable: No
Unit: Millions of Dollars
Present value of projected future cash flows. A key component of intrinsic value.
Terminal Growth Rate (Premium Plus)
Chartable: No
Unit: Number
The long-term estimate for free cash flow growth rate used in discounted cash flow analysis. We use historical observations of the stock’s industry instead of future predictions to determine this value.
Terminal Value (Academic) (Premium Plus)
Chartable: No
Unit: Number
In discounted cash flow analysis, the terminal value of a company if future cash flows are forecasted into perpetuity. Forecasting into perpetuity is the more academic means of computing a terminal value, as exit-multiple valuations are more common with investors.
Terminal Value Exit Multiple (Premium Plus)
Chartable: No
Unit: Number
DCF terminal value using future EV/EBITDA exit multiples.
Weighted Average Cost of Capital (Premium Plus)
Chartable: No
Unit: Number
Weighted Average Cost of Capital — the blended cost of financing. A company must earn above WACC to create value.