Fair Value Of Stocks

đź“Š Investing
1

Hello you very wonderful and intelligent individuals that make up this forum. I hope you have had a pleasant week.

I know some analysts provide information such as Fair Value of what they believe a share price should be. This is a good way to determine if a stock is undervalued. Can i please kindly ask how these calculations are worked out, if anyone please had the formula to calculate Fair Value on a company i would be forever grateful? Thank you very much for any help you can kindly give me, it really would be very much appreciated.

Sending you lots of good wishes and i truly hope you have an amazing weekend. All the best.

2

It’s actually more straightforward than it seems, but in practice not very relevant.

Step 1. Estimate future cash flows.
Step 2. Discount them to their present value.

Edit:

Let me clarify maybe; the biggest use case for DCF analysis or the computation of any “fair value” is more for scenario or sensitivity analyses. Computing one “fair value” is pretty meaningless in itself, and should have very little weight in your trading.

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I don’t know the formula, but if I want to check a company I usually go here;

https://simplywall.st/dashboard

It gives loads of info including Fair Value.

Enter the company you want to research in the search box, for example Unilever;

Your limited to checking 5 companies per month on the free plan

4

I don’t really trust Simplywallst’s valuations they’re all over the place usually.

I’d prefer a DCF or reverse DCF to check them against.

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I would take analyst estimates with a pinch of salt they have massive career risk I’d just use it as a rough guide and not gospel. Most use DCF models, but there are other ways to try and determine intrinsic value for example some use book value, you will also find that certain industries are valued in different ways for example banking and insurance is a specialty on its own and certain industries have generally certain PE’s….I know on YouTube there is an American guy :us: that has software which you can sign up for that has a half decent easy to use DCF calculator. YouTube channel is ( everything money) but the guy is quite arrogant so be warned lol. Determining fair value or intrinsic value is literally the art of investing 2 people can get 2 different figures.

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6

Brian Feroldi has given away a reverse DCF calculator. It’s not perfect but it’s definitely useable.

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I think TEAM17 GROUP PLC is now within what i would describe as a fair value (p182).

Fair play there issued a profit warning today, is there anyone looking at this company?