Fair Value Calculator

Fair Value Calculator is a simple discounted model calculator to help you find the fair value of a company using Earnings per share (EPS) forecast. With a few simple values, you can estimate the intrinsic value of a company.

How to use Fair Value Calculator?

This is a simple discounted model calculator to help you find the fair value of a company. With a few simple values, you can estimate the rough intrinsic value of a stock. The calculation consists of the following key values:

1. Growth Rate: It is the expected rate at which the company will grow in the upcoming years. Keep a realistic growth rate for efficient calculations.

2. Discount rate: The discount rate is usually calculated by CAPM (Capital asset pricing model). However, it can also be considered as the individual investor’s required rate. This means that many investors use the discount rate as the rate of return that they want to earn from the stock. For example, let’s say that you want an annual return rate of 12%, then you can use it as the discount rate.

3. Terminal Growth Rate: No company can grow at a fast rate for infinity. Terminal growth rate represents an assumption that the company will continue to grow (or decline) at a steady, constant rate into perpetuity, after the forecasted growth years. The terminal growth rate of a company can typically range between the historical inflation rate and the average GDP Growth rate. We suggest keeping the terminal growth rate 3-4% or lower.

Total Intrinsic value: This is the fair value of stock and is equal to the sum of growth value and terminal value.

Always look at the fair value of the company before investing. If the total intrinsic value of a company is greater than the current market price, the stock is undervalued. Otherwise, it is overvalued.

Frequently Asked Questions

  1. How do you calculate fair value?
  2. How do you calculate the fair value of shares?
  3. Why Should you use Fair Value Calculator?