GF Value is an intrinsic value developed by GuruFocus, using our internal algorithm based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow).
- GuruFocus adjustment factor based on the past returns and growth.
- Future estimates of performance.
The S&P 500 GF Value is calculated using the data of the S&P 500 index, which represents the current intrinsic value of the S&P 500 index. As the S&P 500 index is one of the most commonly followed equity indices, we believe that the S&P 500 GF Value can give an overview of the fair value that the US stock market should be traded at.
The line of GF Value in the graph shows the fair value’s trend over a period of time. We believe the US market should be traded around the S&P 500 line of GF Value and thus the index price will most likely fluctuate around the line of GF Value. If the index price is significantly above the line of GF Value, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the line of GF Value, its future return will likely be higher. If the current price is around the line of GF Value, then it is fairly valued.
Please note, the evaluation of "Possible Value Trap, Think Twice" is only used for individual stock, we do not use it for the S&P 500 Index. It is for the companies that look very undervalued, but either in the long term trend of business decline, or in financial distress.
Using the specific company’s data, we can arrive at GF Value for each individual stock. Based on the relationship between the current stock price and the GF Value, GuruFocus provides the following 6 evaluations:
| Posssible Evaluations | All-in-One Screener Examples (2) |
|---|---|
| Possible Value Trap, Think Twice (1) | Predictable Companies that possibly be Value Traps |
| Significantly Overvalued | Predictable Companies which are Significantly Overvalued |
| Modestly Overvalued | Predictable Companies which are Modestly Overvalued |
| Fairly Valued | Predictable High Quality Companies which are Fairly Valued |
| Modestly Undervalued (3) | Predictable High Quality Companies which are Modestly Undervalued |
| Significantly Undervalued (3) | Predictable High Quality Companies which are Significantly Undervalued |
- "Possible Value Trap, Think Twice" is only used for individual stocks, which is for the companies that look very undervalued, but either in the long term trend of business decline, or in financial distress.
- These are some simple examples. You can access our GF Valuation filter under All-in-One Screener’s Fundamental tab, and Price-to-GF-Value filter under Valuation Ratio tab and set your own criteria.
- There is only a sufficient margin of safety when the stock is undervalued.
