About the Online Valuation


Our Online Valuation Service looks up valuation inputs from SEC EDGAR data, and other free sources.  The Service uses quarterly and annual income statement, balance sheet, and cash flow statements to calculate NOPMs and other ratios. The calculations are based on observed historical data.  It also attempts to look up data regarding analyst estimates about growth rates. It combines these inputs using the discounted cash flow valuation method described in Streetsmart Guide to Valuing a Stock to come up with a baseline intrinsic value for a stock.

The Online Valuation Procedure:

Simply type the stock symbol into the box and click on the Get Baseline Valuation button.  We follow about 5000 different stocks.  If we follow the stock, the Online Valuation Screen will appear with the baseline valuation for the stock. The 20 input estimates for the stock will also be shown. You can change any input estimate, with the exception of the WACC on this screen, and hit the Recalculate button which recomputes the intrinsic stock value, which is now based on your changes.

The Program has a Cash Flows button that shows the detailed General Pro Forma cash flow screen associated with the valuation.

When you've finished looking at a company, you can click the Value Another Stock button and start the process over.

The Inputs:

Garbage in, Garbage out! Like any other computer program, if the inputs into our Online Valuation Service are garbage, the resulting valuation also will be garbage.  The scope of estimating and calculating all the data for 5000 + stocks can result in some weird valuations, so be patient.  If a figure comes up for a certain input that is either highly implausible or looks wrong, indeed it may be. If a valuation is way out of line, figure out where the Service may have strayed on a valuation, and correct it.  Ours is a daunting task.  The Baseline Valuation is meant to be a starting point for further, more careful analysis. The DCF valuation procedure does not work well for certain sectors, notably REITs, and some financial companies.

NOPMs and Growth Rates:

NOPMs and Growth Rates are the two most important inputs for the valuation process. If the most recent net operating profit margin for a company is negative, the stock value most likely will be zero.  To overcome this problem, estimate an average NOPM for the company over the Excess Return Period and put it into the NOPM slot in the Online Valuation Screen and hit Recalculate.  This will give you a more reasonable valuation.

The Growth Rate is the most important influence on valuation for most stocks.  In our DCF approach in our general screen, the growth rate impacts revenues and earnings in the same magnitude.  As a proxy for growth, we use analyst estimates for EPS growth over the intermediate termó5 to 10 years, if it's available.  If analyst estimates are not available, we use historical growth data.  If historical info is not available, our Service defaults to an assumed 5% per year growth rate.

Default Inputs:

We have certain inputs that we have given an initial value, and the investor may change to suit the company that's being analyzed.  These include the company's Bond Spread to Treasury (1.5%) and Preferred Stock Yield (7.5%). If the stock of the company has a beta value, we look it up and use it.  If no beta is available, we use a default value of 1.0.

We have estimated a constant Equity Risk Premium of 3.0%, a 10-Year Treasury Rate of 5.0%, and a 10-year Excess Return Period.  Like all of the other inputs, these three items may be changed by the user.  A 10-year Excess Return Period is a very long time for a company to keep a competitive advantage.  For many companies, especially financial companies, a 5-year Excess Return Period may be more appropriate and certainly more conservative.