Valuation and the headline model
One model leads each stock's valuation, chosen by the kind of business it is. Every other model is shown beside it, and the price is set against the headline in one sentence.
- Address
- /stocks/<ticker>/valuation
- Headline
- One model, picked by the business's profile
- Wording
- "undervalued by 18% vs model" — always a number and a source
- Rebuilt
- Every night after the US close
- It is not
- Advice, a price target or a forecast
One model leads
Each stock's valuation has one headline: the value per share from a single model. One model, not an average, so the figure can be traced to one set of inputs; when it looks wrong, the fix is in that model's inputs, and the other models never pull it back.
Every other model the company can be valued with is shown beside the headline, with its own value and range, so the spread between them is on the page for anyone who wants it.
Which model, for which business
Every covered company has a valuation profile — bank, insurer, REIT, regulated utility, other financial, software, high growth, cyclical, mature and stable, or general — and the profile decides which models may lead, in order. The headline is the first on the list that can give a value.
| Profile | May lead, first choice first |
|---|---|
| Bank | Justified price to tangible book → P/E against peers → P/E against its own history |
| Insurer | Justified price to book → P/E against peers → P/E against its own history |
| REIT | Price to Cash FFO against its own five-year history |
| Other financial | P/E against peers → P/E against its own history |
| Regulated utility | P/E against its own history → P/E against peers → EV/EBITDA |
| Every other profile | Five-year DCF → P/E against peers → EV/EBITDA → EV/Revenue |
The profile is a judgement made per company and kept in the site's code; the Valuation tab names it and says why the headline model fits that kind of business.
When a model cannot lead
A model is passed over when it does not run, gives no positive value, or gives a value far outside any plausible range of the price. A DCF also has to pass a cash-flow gate: the latest year's operating income must be positive, and the last three years' free cash flow must add up to more than zero. A company that does not earn cash yet is not valued on cash it has not earned.
The Valuation tab lists every candidate passed over and why. Some models do not apply to some businesses at all — a DCF to a bank, a dividend model to a company that does not pay one — and their pages are greyed out as not applicable.
Price against the model
The headline is set against the price in one sentence: "undervalued by 18% vs model" when the price is below the model's value, "overvalued by 7% vs model" when it is above. The number is the price divided by the model's value, minus one. The word always comes with its number and the model it came from, and it follows the headline whatever the other models say.
Colour carries the same judgement and nothing else: green when the price is below a value it is compared with, orange-red when it is above.
What goes in, and what does not
- Discount rates start from the latest 10-year Treasury close, read the night of the valuation.
- The analysts' estimates — revenue and earnings per share for the coming years — are inputs: a DCF follows the revenue consensus for its first three years, and the multiples set a forward year beside the last reported one. Their price targets and grades never are. The consensus target is shown beside the models as a reference, which is only a fair comparison while it stays out of them.
- No stock is tuned by hand. Any assumption is set for a whole profile, fitted on half the covered stocks and checked on the other half.
Each night's valuation is stored as it was computed, with the code version that computed it.
What it is not
A model's value is what that model says the business is worth under its assumptions. It is not advice, not a price target and not a forecast of where the price will go.