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Intrinsic Value Calculator - Earnings/Dividend Yield (%)
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This Intrinsic Value Calculator is a stock valuation Calculator that uses proven and science-based valuation methods to automatically estimate the intrinsic value of stocks.
What Is Intrinsic Value?
Intrinsic value is a measure of what a company's stock is worth. Intrinsic value is different from the current market price of a stock. However, comparing it to that current price can give investors an idea of whether the stock is undervalued or overvalued.
How to Calculate Intrinsic Value
To calculate the intrinsic value of a stock, we use two valuation methods: Discounted Cash Flow (DCF) Valuation and Relative Valuation. We take the average of these two methods to estimate the intrinsic value as accurately as possible.
Using Discounted Cash Flow (DCF) analysis, cash flows are estimated based on how a business may perform in the future. Those cash flows are then discounted to today’s value to obtain the company's intrinsic value. The discount rate we used is a risk-free rate of return (Fixed Deposit Interest Rate).
While intrinsic valuation models see to value a business by looking only at the company on its own, relative valuation models seek to value a business by comparing the company to other Low-Risk investment opportunities, Fixed Deposit Return.
Line Graph : Earnings Yield vs Fixed Deposit Interest Rate vs Dividend Yield
Other than automatically estimating the intrinsic value of a stock, this script would plot the Earnings Yield, Fixed Deposit Interest, and Dividend Yield of a stock.
Investors should monitor Earnings Yield, Fixed Deposit Interest, and Dividend Yield of a stock for a few key reasons:
Earnings Yield:
Earnings Yield is a crucial metric that provides insight into a company's profitability. It is calculated by dividing the company's earnings per share (EPS) by the current stock price. A higher Earnings Yield indicates that the company is generating more profit for each dollar invested by shareholders. This metric is particularly useful when comparing a company's profitability against other investment options, such as fixed deposits, bonds, or other stocks.
Fixed Deposit Interest:
The Fixed Deposit Interest Rate, also known as the risk-free rate, is the return an investor can expect from investing in a risk-free asset such as a government bond or a fixed deposit. This rate serves as a benchmark for evaluating the returns offered by other investments, including stocks.
Dividend Yield:
Dividend Yield is a measure of the annual dividend income received by an investor relative to the stock price. It is calculated by dividing the annual dividend per share by the current stock price. Dividend-paying stocks often appeal to income-oriented investors seeking regular cash flow.
Monitoring these metrics can help investors make informed decisions about their investments, assess the relative attractiveness of different investment options, and manage their investment portfolios effectively.
Key Financial Ratio display
Key investment ratios play a crucial role in helping investors make informed investment decisions. By providing valuable insights into a company's financial health, ratios such as the Gross Margin, R&D Ratio, Net Margin, Return on Equity (ROE) Ratio allow investors to quickly assess a company's profitability, liquidity, and financial stability.
Gross margin is the percentage of a company's revenue that it retains after direct expenses, such as labor and materials, have been subtracted. Gross margin is an important profitability measure that looks at a company's gross profit compared to its revenue.
The Research & Development (R&D) to Sales Ratio is a measure to compare the effectiveness of R&D expenditures between companies in the same industry. It is calculated as R&D expenditure divided by Total Sales.
The net profit margin, or simply Net Margin, measures how much net income or profit is generated as a percentage of revenue. It is the ratio of net profits to revenues for a company or business segment.
The Return on Equity (ROE) Ratio is a measure of a company's profitability and efficiency in using its shareholders' investments to generate profits. It's calculated by dividing a company's net income by its shareholder's equity. This ratio is a reflection of how well a company is utilizing its shareholders' capital to generate returns.
The Operating Cash to Debt Ratio measures the percentage of a company's total debt that is covered by its operating cash flow for a given accounting period. If the company’s ratio were higher, it would indicate a strong fiscal position, considering its cash flow from operations is higher than its total debt.
Free Cash Flow Margin is a significant financial metric that measures a company's ability to generate cash from its operations after accounting for capital expenditures. It evaluates the percentage of free cash flow relative to total revenue. A high Free Cash Flow margin suggests that a company is efficient at converting its revenue into cash flow.
Release Notes
The Intrinsic Value Calculator is a stock valuation Calculator that uses proven and science-based valuation methods to automatically estimate the intrinsic value of stocks.
What Is Intrinsic Value?
Intrinsic value is a measure of what a company's stock is worth. Intrinsic value is different from the current market price of a stock. However, comparing it to that current price can give investors an idea of whether the stock is undervalued or overvalued.
How to Calculate Intrinsic Value
To calculate the intrinsic value of a stock, we use two valuation methods: Discounted Cash Flow (DCF) Valuation and Relative Valuation. We take the average of these two methods to estimate the intrinsic value as accurately as possible.
Using Discounted Cash Flow (DCF) analysis, cash flows are estimated based on how a business may perform in the future. Those cash flows are then discounted to today’s value to obtain the company's intrinsic value. The discount rate we used is a risk-free rate of return (Fixed Deposit Interest Rate).
While intrinsic valuation models used to value a business by looking only at the company on its own, relative valuation models used to value a business by comparing the company to other Low-Risk investment opportunities, Fixed Deposit Return.
Line Graph : Earnings Yield vs Fixed Deposit Interest Rate vs Dividend Yield
Other than automatically estimating the intrinsic value of a stock, this script would plot the Earnings Yield, Fixed Deposit Interest, and Dividend Yield of a stock.
Investors should monitor Earnings Yield, Fixed Deposit Interest, and Dividend Yield of a stock for a few key reasons:
Earnings Yield: (Blue line)
Earnings Yield is a crucial metric that provides insight into a company's profitability. It is calculated by dividing the company's earnings per share (EPS) by the current stock price. A higher Earnings Yield indicates that the company is generating more profit for each dollar invested by shareholders. This metric is particularly useful when comparing a company's profitability against other investment options, such as fixed deposits, bonds, or other stocks.
Fixed Deposit Interest: (Grey line)
The Fixed Deposit Interest Rate, also known as the risk-free rate, is the return an investor can expect from investing in a risk-free asset such as a government bond or a fixed deposit. This rate serves as a benchmark for evaluating the returns offered by other investments, including stocks.
Dividend Yield: (Green line)
Dividend Yield is a measure of the annual dividend income received by an investor relative to the stock price. It is calculated by dividing the annual dividend per share by the current stock price. Dividend-paying stocks often appeal to income-oriented investors seeking regular cash flow.
Monitoring these metrics can help investors make informed decisions about their investments, assess the relative attractiveness of different investment options, and manage their investment portfolios effectively.
Key Financial Ratio display
Key investment ratios play a crucial role in helping investors make informed investment decisions. By providing valuable insights into a company's financial health, ratios such as the R&D ratio, Net Margin, Return on Equity (ROE) Ratio allow investors to quickly assess a company's profitability, liquidity, and financial stability.
The Research & Development (R&D) to Sales ratio is a measure to compare the effectiveness of R&D expenditures between companies in the same industry. It is calculated as R&D expenditure divided by Total Sales.
The Net Margin, measures how much net income or profit is generated as a percentage of revenue. It is the ratio of net profits to revenues for a company or business segment.
The Return on Equity (ROE) Ratio is a measure of a company's profitability and efficiency in using its shareholders' investments to generate profits. It's calculated by dividing a company's net income by its shareholder's equity. This ratio is a reflection of how well a company is utilizing its shareholders' capital to generate returns.
The Cash to Debt Ratio measures the percentage of a company's total debt that is covered by its operating cash flow for a given accounting period. If the company’s ratio were higher, it would indicate a strong fiscal position, considering its cash flow from operations is higher than its total debt.
Release Notes
Optimize intrinsic value calculation ( Discounted Cash Flow )Discount Rate
By default, the discount rate follows the fixed deposit interest rate. However, users can overwrite this rate in the settings panel if needed. The discount rate represents the rate of return required by investors to compensate for the time value of money and risk associated with the investment.
Owner Earnings
Owner earnings are calculated as the lower of Free Cash Flow (FCF) or Earnings. Free Cash Flow is calculated as Operating Cash Flow minus Capital Expenditures, while Earnings calculated using the net income of the company.
Growth Rate
We incorporate the lesser of the most recent 5 years' average revenue growth rate or cash flow from operating activities (CFOA) growth rate in our calculation, thereby ensuring a more conservative projection of future growth.
Initial Growth Phase
In estimating the intrinsic value of a company's stock, we utilize a five-year period to represent the Initial Growth Phase.
Terminal Growth Phase
For the Terminal Growth Phase, we apply a growth rate of 1% to the company's overall growth rate. If the initial growth phase growth rate is 10% per year, then 1% of that growth rate would be 0.1% per year.
Release Notes
Optimized display panelRelease Notes
Add an input field for user to set minimum of discount rate to calculate intrinsic value.Invite-only script
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