The GuruFocus Valuation Chart box shows the stock prices relative to a few valuation metrics, including the GF Value For instance, this is a sample valuation box for Walmart (WMT, Financial):
The valuation box shows the share price of Walmart relative to the following parameters for the given day. Put your mouse of the chart to see the values for each parameter.
1. GF Value
2. Prof. Bruce Greenwald's Earnings Power Value
3. Net Current Asset Value
4. Tangible Book
5. Projected FCF
6. Median PS Value
7. Graham Number
8. Intrinsic Value DCF Earnings Based
9. Intrinsic Value DCF FCF Based
10. Peter Lynch Fair Value
The valuation box we display will in no way replace your valuation process of the company, but it gives a rough idea of where the company is traded relative to its value. For instance, from the valuation box above we can see that Walmart is traded slightly above is valuations based on the GF Value, Earnings Power Value. It is also above the historical median relative to sales.
Attached is a table summarizing each of the valuation methods on GuruFocus. Click on the hyperlinks to view a detailed term page.
| Valuation Methods | Asset Based | Earning Power Based | Combination of Asset & Earnings Power | Growth Considered | Comment |
| Net Cash | X | No | Cash & Cash Equivalents + Short Term Investments – Total Liabilities | ||
| Net Current Asset Value (NCAV) | X | No | Cash and Short-Term Investments + (0.75 * Accounts Receivable) + (0.5 * Inventory) - Total Liabilities | ||
| Projected FCF | X | Yes | Value = (Growth Multiple)*FCF(6 year avg) + 0.8*Total Equity(most recent) Details here | ||
| Graham Number | X | No | SquareRoot of (22.5 * Tangible Book Value * Earnings per share) | ||
| Median P/S Value | X | No | Historical range traded relative to sales. | ||
| Peter Lynch Fair Value | X | Yes | 5-Year EBITDA Growth Rate * Earnings per share. Only applies to companies with consistent growth rate between 8% to 25%. If growth rate is higher than 25%, we use 25%. Please note that this is different from the value projected in Peter Lynch Chart. In Peter Lynch Chart, the P/E ratio is always 15. But in Peter Lynch Fair Value calculation, P/E ratio is equal to the 5-year average EBITDA growth rate, which can be higher or lower than 15. |
GuruFocus' exclusive GF Value method considers three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
We believe the GF Value Line is the fair value that the stock should be traded at. The stock price will most likely fluctuate around the GF Value Line. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
Please note, "Possible Value Trap, Think Twice" is for the companies that look very undervalued, but either in the long term trend of business decline, or in financial distress.
Not all parameters will apply. For instance, Peter Lynch's fair value method is only applicable to companies that have relatively consistent growth. The Graham number is only applicable to companies that have positive tangible book value and earnings per share. Additionally, GuruFocus does not store in the database the Intrinsic Value: DCF (Earnings Based) and Intrinsic Value: DCF (FCF Based) for unpredictable companies (business predictability rank of 1 star or unranked) as the DCF result may not be accurate due to the unpredictability of the business.
Another example is Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial). We can see that on Feb. 26, 2024, Berkshire is also traded at above its historical median P/S ratio, above its tangible book of $188.24 a share and Graham number of $384.29 a share.
Also see the Apple (AAPL, Financial) valuation box below:
Because of its tremendous growth, Apple traded on Feb. 26, 2024, above all the valuation parameters such as DCF, tangible book, GF Value and Peter Lynch Value.
The valuation box will also clearly indicate it if a company is traded at below its net current asset value (NCAV). For example, Taiwan-based GigaMedia Ltd. (GIGM, Financial) is a Ben Graham Net-Net as of Feb. 26, 2024, because it trades at below its net current asset value.
As discussed in the table above, a company can be evaluated according to its asset value, its future earnings power, or the combination of both. Please read the company's annual/quarter reports to understand more about which will apply. You can view the 10-Q and 10-K filings by clicking on the "Filings" tab of the stock summary pages.
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