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It is important to note this is not a static model nor is FV an absolute number but an approximation.  As company and/or market data change on a daily basis so does the FV (Fair Value).  FV normally does not flucuate more than a few % points back and forth on a daily basis.  Only a major change will have a major impact on FV.


Fair values are based, in part, on the following: Discounted cash flow , a modified Graham's intrinsic value formula and a P/E analysis. The valuation model consists of two parts.

  1. The discounted cash flow and the modified Graham's intrinsic value are blended to arrive at a fair value.

  2. A P/E analysis based on historical adjusted values.

Fair value is the minimum value of the two parts. The modified Graham’s formula is:
IV=Adjusted EPS*(8.5+1.9*Estimate EPS 5 yr growth rate)*Safety Factor*MIN(1,4.4/20yr AAA corp Bond Rate)


Historical price to sales trend is also looked at but does not carry the weight as the metrics listed above. Past financials (up to 10 years) are analyzed to project EPS and cash growth projections.  Company conference calls and presentations are examined for any information that would adjust these projections.  Trends are calculated based at various yearly intervals. They are not weighted equally. More weight is given to the recent trends.

Adjustments are applied based on a number of factors. They are influenced by a variety of metrics such as but not limited to:

           Consistent longer term performance for earnings & cash growth & equity growth

Concensus earnings for the current and next 2 years are used in most cases

Earnings stability

Free cash flows
Payout to FCFLiabilities/Equity
Market cap
Returns on retained earnings

Large changes in number of days cost of goods in inventory
Piotroski Score
Altman Z score
Ratio made up of PE,PB,Debt/Equity and Current ratio
Tangible book value

Longer term market direction

PE over various time frames


Stock financial data, bond rates, consensus estimates, etc., are obtained from various internet financial sources.

Cody-Klein Enterprises

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