Stock Fair Value Calculator

Every investor wants to know the same thing: is this stock worth buying at the current price? The answer lies in estimating intrinsic value — what the stock is actually worth based on its future earnings power, independent of what the market says today.

Professional analysts use discounted cash flow (DCF) models that can span hundreds of rows in a spreadsheet. But you do not need that level of complexity to get a useful answer. A simplified DCF — sometimes called a DCF-lite — lets you estimate fair value with just four inputs: current earnings, expected growth, a discount rate, and a terminal multiple.

Try It: Stock Fair Value Calculator

Enter a stock's current EPS, your growth and discount rate assumptions, and a terminal P/E multiple. The calculator projects earnings forward, discounts them back to today, and shows you the estimated fair value alongside a margin of safety.

How the Simplified DCF Works

The model does three things:

1. Projects earnings forward — takes today's EPS and grows it at your assumed rate for N years.
2. Discounts each year back — a dollar earned 10 years from now is worth less than a dollar today. The discount rate reflects the return you require for the risk you are taking.
3. Adds a terminal value — at the end of the projection, the stock will still have value. The terminal P/E represents the multiple investors will pay at that point.

Choosing Your Inputs

The output is only as good as the inputs. Here is how to think about each one:

• EPS: Use trailing twelve-month EPS for established companies, or forward EPS estimates for faster growers. Avoid one-time items.
• Growth rate: Be conservative. Analyst consensus is a starting point, but most companies mean-revert toward GDP-like growth (3-5%) over long periods. Use 5-15% for quality growers, higher only with strong conviction.
• Discount rate: This is your required rate of return. For large, stable companies, 8-10% is reasonable. For smaller or riskier firms, use 12-15%. Think of it as the opportunity cost of your capital.
• Terminal P/E: What will the market pay for this company's earnings at the end of the projection? The S&P 500 average is roughly 15-18x. Fast growers may deserve more, slow growers less.

The Margin of Safety

Benjamin Graham's most important concept: never buy a stock at exactly its fair value. Because your estimates are inherently uncertain, you need a buffer. A margin of safety means buying below your estimated fair value so that even if your growth assumptions are too optimistic, you can still do well.

A general framework:

• Greater than 30% margin: Strong margin of safety. Worth a closer look.
• 10-30% margin: Moderate. Reasonable if your conviction in the growth estimate is high.
• Near zero or negative: The stock is priced at or above your fair value estimate. No margin of safety at current prices.

Limitations

This calculator is a starting point, not the final word. Key limitations to keep in mind:

• It assumes steady growth, but real companies accelerate and decelerate.
• It does not account for capital structure changes, buybacks, or debt paydown.
• Small changes in growth or discount rate assumptions can dramatically shift the output. Always run multiple scenarios.
• It works best for profitable, established companies. Unprofitable or pre-revenue companies need different frameworks.

Find Undervalued Stocks

Ready to screen for stocks trading below their estimated fair value? Use our screener to narrow down candidates:

• Try the Value Screener Preset to find fundamentally cheap stocks with strong earnings.
• Or screen for low P/E with positive earnings growth to find potential bargains.