Valuation
Intrinsic value
Compare the market value of a stock to its intrinsic equity value.
| term | description | formula |
|---|---|---|
| Price / Intrinsic Value | Compare a stock's market value to its Intrinsic (fair) value, calculated based on a set of methods. | Price ÷ Intrinsic Value |
| Price / Intrinsic Value (DCF FCF) | Compare a stock's market value to its Intrinsic equity value based on discounted cash flow (unlevered DCF) analysis | Price ÷ Intrinsic value (DCF FCF) |
| Price / Intrinsic value (DCF FCF) no growth | Compare a stock's market value to its Intrinsic equity value based on discounted cash flow (unlevered DCF) analysis, which uses no growth future free cash flow projections. | Price ÷ Intrinsic value (DCF FCF) no growth |
| Price / Intrinsic value (DCF OE) | Compare a stock's market value to its Intrinsic equity value based on discounted Owner Earnings (levered DCF) analysis. | Price ÷ Intrinsic value (DCF OE) |
| Price / Intrinsic value (DCF OE regression) | Compare a stock's market value to its Intrinsic equity value based on discounted Owner Earnings analysis, using regression. | Price ÷ Intrinsic Value (DCF OE regression) |
| Price / Intrinsic value (Buffett) | Compare a stock's market value to its Intrinsic value calculated by taking present book value and dividends (Dividend Discount Model) | Price ÷ Intrinsic value (Buffett) |
| Price / Intrinsic value (Residual Income) | Compare a stock's market value to its Intrinsic equity value using the residual income approach. | Price ÷ Intrinsic value (Residual Income) |
| Price / Earnings Power Value | Compare a stock's market value to its Earnings Power Value. | Price ÷ Earnings Power Value |
| Price / Intrinsic value (Lynch) | Compare a stock's market value to its Intrinsic Value, based on Peter Lynch's famous rule of thumb. | Price ÷ Intrinsic value (Lynch) |
| Price / Adjusted Intrinsic value (Lynch) | Compare a stock's market value to its Adjusted Intrinsic Value, based on Peter Lynch's famous rule of thumb, but adjusted to low interest rates. | Price ÷ Adjusted Intrinsic value (Lynch) |
| Price / Intrinsic value (Graham formula) | Compare a stock's market value to its Intrinsic value using the Graham formula. | Price ÷ Intrinsic value (Graham formula) |
| Price / Intrinsic value (O'Malley formula) | Compare a stock's market value to its Intrinsic value using the O'Malley formula. | Price ÷ Intrinsic value (O'Malley formula) |
| Price / Graham number | Compare a stock's market value to its Graham number. | Price ÷ Graham number |
| Price / Intrinsic Value based on EBITDA | Compare a stock's market value to its Intrinsic Value estimate based on an EV/EBITA expectation. | Price ÷ Intrinsic value based on EBITDA |
| Margin of Safety | the amount by which a company's shares are trading below their Intrinsic (fair) value. | 1 − Price ÷ Intrinsic Value |
| Forward rate of return | The return that investors buying the stock today can expect from it in the future. (Donald Yacktman) | Normalised Free Cash Flow + EBITDA.6y CAGR + inflation |
| Adjusted Forward rate of return | Forward Rate of Return adjusted with predictability of earnings growth. | Forward rate of return − abs(Forward rate of return × (1 − Predictability Score)) ÷ 2) |
| Payback in years | Number of years before the investor gets back the paid money. |
x for which (Market cap − Common Book Value)
= sum of futureYear over x future years of
(slope × (futureYear − 1900) + intercept)
× (1 − Marginal tax rate)
|
| Price / Intrinsic Value (Value Driver Formula) | Compare a stock's market value to its Intrinsic Value (Value Driver Formula). | Price ÷ Intrinsic Value (Value Driver Formula) |
EV vs Earnings
Compare a company’s Enterprise Value to its income and cash flow fundamentals, giving a capital structure–neutral view.
| term | description | formula |
|---|---|---|
| Revenue yield on Enterprise Value | The Revenue by the firm relative to the Enterprise Value. Inverse of EV per Revenue. | Revenue ÷ Enterprise Value |
| Gross Profit yield on Enterprise Value | Quite similar to Revenue / Enterprise Value, with the likely benefit of excluding low-gross-margin businesses from consideration. | Gross Profit ÷ Enterprise Value |
| EBITDA yield | The annual EBITDA by the firm relative to the Enterprise Value. Inverse of EV per EBITDA. | EBITDA ÷ Enterprise Value |
| EBITA yield | The annual EBITA by the firm relative to the Enterprise Value. Inverse of EV per EBITA. | EBITA ÷ Enterprise Value |
| Adjusted Operating Income yield | The adjusted Operating Income earned by the firm relative to the Enterprise Value. Inverse of EV / Adjusted Operating Income. | Adjusted Operating Income ÷ Enterprise Value |
| Operating Income yield | The annual Operating Income earned by the firm relative to the Enterprise Value. Inverse of EV / Operating Income. | Operating Income ÷ Enterprise Value |
| EBIT yield | Factor of Joel Greenblatt’s Magic Formula. The annual EBIT earned by the firm relative to the Enterprise Value. Inverse of EV / EBIT. | EBIT ÷ Enterprise Value |
| NOPAT Yield | The Net Operating Profit After Tax relative to the Enterprise Value. | Net Operating Profit After Tax (NOPAT) ÷ Enterprise Value |
| Net income yield on Enterprise Value | The Net income From Continuing Operations by the firm relative to the Enterprise Value. Inverse of Enterprise Value / Net income. | Net income From Continuing Operations ÷ Enterprise Value |
| Cash Flow from Operations yield on EV | The Cash Flow from Operations to Equity relative to the Enterprise Value. Inverse of EV per Cash Flow from Operations. | Cash Flow from Operations ÷ Enterprise Value |
| Cash Flow After Taxes yield | The annual Cash Flow After Taxes by the firm to equity, relative to the Enterprise Value. Facilitates comparing firms from different industries and with different capital structures. | Cash Flow After Taxes ÷ Enterprise Value |
| Cash-NOPAT Yield | The Cash Net Operating Profit After Tax relative to the Enterprise Value. | Cash-NOPAT ÷ Enterprise Value |
| Free Cash Flow yield on Enterprise Value | The Free Cash Flow to the firm relative to the Enterprise Value. Inverse of EV per Free Cash Flow. | Free Cash Flow to the Firm ÷ Enterprise Value |
| Enterprise Value / Revenue | A valuation measure that compares the Enterprise Value of a company to the company's sales. EV/sales gives investors an idea of how much it costs to buy the company's sales. | Enterprise Value ÷ Revenue |
| Enterprise Value / Gross profit | Quite similar to Enterprise Value to revenue, with the likely benefit of excluding low-gross-margin businesses from consideration. It may identify a few opportunities missed by EV/EBIT or EV/EBITDA (Acquirer's multiple), if you are willing to accept more volatility as a trade-off. | Enterprise Value ÷ Gross profit |
| Enterprise Value / Research | Measures the relationship between a company's Enterprise Value and its research and development (R&D) expenditures. | Enterprise Value ÷ Research & Development |
| Enterprise Value / EBITDA | A variant of the Acquirer's Multiple that compares the value of a business, free of Debt, to its EBITDA, with the advantage of valuing a company regardless of its capital structure. | Enterprise Value ÷ EBITDA |
| Allen Enterprise Value / EBITDA | Compares the value of a business, free of Debt, to its EBITDA, with the advantage of valuing a company regardless of its capital structure. The Enterprise Value/ EBITDA according to Dana Allen is a number, even when its components are negative. |
|
| Enterprise Value / Adjusted Operating Income | a.k.a. The Acquirer's Multiple of Tobias Carlisle: it is the valuation ratio used to find attractive takeover candidates. Compares the value of a business, free of Debt, to its operating income, with the advantage of valuing a company regardless of its capital structure. Inverse of Operating Income yield. Compares the value of a business, free of debt, to its Adjusted Operating Income, with the advantage of valuing a company regardless of its capital structure. Inverse of Operating Income yield. | Enterprise Value ÷ Adjusted Operating Income |
| Enterprise Value / Operating Income | The valuation ratio used to find attractive takeover candidates. Compares the value of a business, free of Debt, to its operating income, with the advantage of valuing a company regardless of its capital structure. Inverse of Operating Income yield. Compares the value of a business, free of debt, to its Operating Income, with the advantage of valuing a company regardless of its capital structure. Inverse of Operating Income yield. | Enterprise Value ÷ Operating Income |
| Enterprise Value / EBIT | Compares the value of a business, free of debt, to its EBIT, with the advantage of valuing a company regardless of its capital structure. Inverse of EBIT yield. | Enterprise Value ÷ EBIT |
| Enterprise Value / Net income | Compares the value of a business, free of Debt, to its Net income From Continuing Operations, with the advantage of valuing a company regardless of its capital structure. Inverse of Earnings yield on Enterprise Value. | Enterprise Value ÷ Net income From Continuing Operations |
| Enterprise Value / Cash Flow After Taxes | Compares the value of a business, free of debt, to its Cash Flow After Taxes. Facilitates comparing firms from different industries and with different capital structures. | Enterprise Value ÷ Cash Flow After Taxes |
| Enterprise Value / Free Cash Flow | Compares the value of a business to its Free cash flow to the firm, with the advantage of valuing a company regardless of its capital structure. | Enterprise Value ÷ Free Cash Flow to the Firm |
| EVRG | The relative trade-off between the enterprise value of a company, the revenue and the company's expected growth. | (Enterprise Value / Revenue) ÷ Revenue.5y rCAGR |
| EVEBITDAG | The relative trade-off between the price of a stock, the EBITDA and the company's expected growth. | (Enterprise Value / EBITDA) ÷ EBITDA.5y rCAGR |
| EVEBITG | The relative trade-off between the price of a stock, the EBIT and the company's expected growth. | (Enterprise Value / EBIT) ÷ EBIT.5y rCAGR |
| Value Creation Ratio (VCR) | Compares the market's valuation multiple (EV/IC) to the value creation multiple (ROIC/WACC). A value below 1 suggests the market undervalues the company's ability to create value. | EV/ Invested Capital ÷ ROIC/ WACC |
Price vs Earnings
Compare a company’s share price to its income and cash flow fundamentals, from the perspective of equity holders.
| term | description | formula |
| Revenue yield on Price | The annual Revenue by the firm relative to the price. Inverse of Price per Revenue. | Revenue ÷ Price |
| Gross Profit yield on Price | The annual Gross Profit by the firm relative to the price. | Gross Profit ÷ Price |
| EPS yield | The annual earnings relative to price paid for a share. Inverse of Price per EPS. | Earnings Per Share ÷ Price |
| Dividend yield | How much a company pays out in dividends each year relative to its share price. | Traditional Gross Dividend ÷ Price |
| Buyback ratio | The amount of cash paid by a company for buying back its common shares over the past year, divided by its market capitalization. | Common stock issued (repurchased) ÷ Market cap |
| Net Payout yield | Shareholder return as cash paid out both as dividends and as stock buybacks. | Dividend yield + Buy back ratio |
| Expected Return | One year expected return based on price target and dividend. | Price target.expected growth + Dividend yield |
| Debt Paydown yield | The change in average of four quarters of long term debt over a company's market cap. | Net Borrowings ÷ Market cap |
| Shareholder yield | Shows how much money the company is sending back to shareholders. | Net Payout yield + Debt Paydown yield |
| Cash Flow from Operations yield on Price | The Cash Flow from Operation by the firm to equity relative to the stock price. Inverse of Price per Cash Flow from Operations. | Cash Flow from Operations ÷ Price |
| Adjusted Earnings yield | The Adjusted Earnings relative to the stock price. | Adjusted Earnings ÷ Price |
| FCF yield | The Free Cash Flow relative to the Market cap. | Free Cash Flow ÷ Price |
| FCF yield premium | The Free Cash Flow yield premium over the free risk rate. | FCF yield − Risk Free Rate |
| Normalised Owner Earnings yield | The Normalised Owner Earnings relative to the stock price. | Normalised Owner Earnings ÷ Price |
| Adjusted Owner Earnings yield | The Adjusted Owner Earnings relative to the Market cap. | Adjusted Owner Earnings ÷ Price |
| Owner Earnings Yield | The Owner Earnings relative to the stock price. | Owner Earnings ÷ Price |
| Predictive Owner Earnings Yield | The predictive Owner Earnings relative to the stock price. | Predictive Owner Earnings ÷ Price |
| Owner Earnings' yield on Price | The Owner Earnings relative to the stock price. | Owner Earnings' ÷ Price |
| Long-term Reinvestments to Market cap | Measures the relationship between a company's market capitalization and its reinvestments. | −Long-term Reinvestments ÷ Market cap |
| Short-term Reinvestments to Market cap | Shows the change in working capital relative to the Market cap. | −Change in Working Capital ÷ Market cap |
| Payback ratio | Ratio of Motilal Oswal, measuring in what degree 5 years of future estimated income will pay back current market value. | Price ÷ Income After Tax.5y est |
| Price / Sales | Compare a stock's market value to its revenue. The Price to Revenue ratio can vary substantially across industries; therefore, it's useful mainly when comparing similar companies. | Market cap ÷ Revenue |
| Price / Gross profit | Compares a stock's market value to its gross profit. Inverse of Net income yield. | Market cap ÷ Gross profit |
| Price / Research | Measures the relationship between a company's market capitalization and its research and development (R&D) expenditures. | Market cap ÷ Research & Development |
| Price / EPS | A valuation ratio of a company's current share price compared to its per-share earnings. | Price ÷ Earnings |
| Price / Dividend | Price per gross dividend. | Price ÷ Traditional Gross Dividend |
| Price / Cash Flow from Operations | Compares a company's market price to its level of operating cash flow. This is similar to the valuation measure of price-to-free cash flow but uses a looser measure of cash flow, by not deducting capital expenditures. | Market cap ÷ Cash Flow from Operations |
| Price / Free Cash Flow | Compares price of a stock to its Free Cash Flow. | Price ÷ Free Cash Flow |
| Price / Owner Earnings' | Compares the stock price to its Owner Earnings. | Price ÷ Owner Earnings' |
| McLean index | One of McLean's tricks as a quick guide to a share's attractiveness. Less than one is good value. | Price / Sales ÷ Operating Margin |
| PEG | The relative trade-off between the price of a stock, the net profit and the company's expected growth. | Price / EPS ÷ Net income.5y rCAGR |
| PEGY | The price/earnings-to-growth and dividend yield ratio demonstrates how much the market is willing to pay for earnings growth and dividend yield. By incorporating dividend yield, the PEGY ratio accounts for a companies' inclination (or disinclination) to pay out dividends. | Price / EPS ÷ (Net income.5y rCAGR + Dividend yield) |
| PFCFG | The relative trade-off between the price of a stock, the Free Cash Flow and the company's expected growth. | Price / Free Cash Flow ÷ Owner Earnings'.5y rCAGR |
| PDG | The relative trade-off between the price of a stock, the dividend and the company's dividend expected growth. | Traditional Gross Dividend ÷ Traditional Gross Dividend.5y rCAGR |
| ROE / PE | How many units of growth one buys for a unit of P/E. | Return on Equity ÷ Price / EPS |
| Liquidity ratio | Profits to yearly trading value. The more earnings per dollar volume, the higher the probability of finding overlooked value. | Net income ÷ (253 × Dollar volume) |
| Total Return Surplus | Total Return Surplus||The market total return in excess of the intrinsic value created. | Annualized Total Return − Cash Return on Invested Capital (CROIC).avg |
| Market Reward Spread | Shows how much the market rewarded shareholders beyond EPS growth. | Annualized Total Return − EPS growth |
Valuation - Balance
Compare market value to balance.
| term | description | formula |
|---|---|---|
| Price to Proportional Tangible Book Value | Compares a stock's market value to its Proportional Tangible Book Value. | Market cap ÷ Proportional Tangible Book Value |
| Price to Common Tangible Book Value | Compares a stock's market value to its Common Tangible Book Value. | Price ÷ Common Tangible Book Value |
| Price to Book Value | Also Price to Common Shareholders' Equity. Compares a stock's market value to its Common Shareholders' Equity. | Price ÷ Common Book Value.per share |
| Price to Non-cash assets | Market cap to Non-cash assets. | Market cap ÷ Non-cash assets |
| Price to Fixed assets | Market cap to net Fixed Assets. | Market cap ÷ Net Property, Plant and Equipment |
| Price to NCAV | Compares a stock's market value Benjamin Graham's Net current asset value. | Market cap ÷ NCAV |
| Price to Liabilities | Market Value of Equity / Book Value of Total Liabilities. | Market cap ÷ Total liabilities |
| Price to NNWC | Compares a stock's market value to its Net-Net Working Capital. | Market cap ÷ NNWC |
| Faustmann ratio | Compares market value to Net Worth. | Market cap ÷ Net Worth |
| Price to Net cash | Calculated by dividing the Market Capitalisation by Total Cash minus Total Liabilities. | Market cap ÷ Net cash |
| Enterprise Value to Assets | Valuation metric used for measuring the value of the company as compared to its tangible assets and is very helpful in comparing valuations of companies across similar stocks in the sector. | (Enterprise Value + Excess Cash'') ÷ Total Assets |
| Enterprise Value to Tangible Assets | Valuation metric used for measuring the value of the company as compared to its tangible assets and is very helpful in comparing valuations of companies across similar stocks in the sector. | (Enterprise Value + Excess Cash'') ÷ Tangible Assets |
| Enterprise value to Invested Capital | A measure of enterprise value normalized by the level of capital used by the business. | Enterprise Value ÷ Invested Capital |
| Book to Market | Gives the value of a company by comparing the book value of a firm to its market value. | Common Book Value ÷ Market cap |
| Net Cash to Market | Calculated by dividing the Total Cash minus Total Liabilities by Market Capitalisation. | Net cash ÷ Market cap |
| Net Cash change to Market cap | Shows the impact of the company building up their net cash storage. | Net cash.diff ÷ Market cap |
| Net Debt to Market | Gives a sense of how much debt a company has relative to its market value. | Net Debt ÷ Market cap |
| Net Debt change to Market cap | Shows the impact of the company building up their cash storage, or paying down debt. | Net Debt.diff ÷ Market cap |
| Equity financing ratio | Percentage of financing that is equity. | Market cap ÷ Financing |
| Debt financing ratio | Percentage of financing that is debt. | Debt ÷ Financing |