Question 1

What valuation models does this tool use?

Accepted Answer

The Fair Value Calculator runs three separate models on every S&P 500 stock. The Graham Number uses earnings and book value to find a safe price floor. The PEG Ratio checks if the P/E ratio matches earnings growth. The Earnings-Based DCF projects future earnings and brings them back to today's value. We average all three for a combined fair value, and show how much they agree.

Question 2

What is the Graham Number?

Accepted Answer

The Graham Number is a formula from Benjamin Graham, known as the father of value investing and mentor to Warren Buffett. It sets a maximum price for a stock based on its earnings and book value. The formula: square root of (22.5 × EPS × Book Value). The 22.5 comes from Graham's rule: don't pay more than 15 times earnings or 1.5 times book value (15 × 1.5 = 22.5).

Question 3

What does PEG Ratio tell me?

Accepted Answer

PEG stands for Price/Earnings-to-Growth. It was popularized by Peter Lynch, one of the most successful mutual fund managers in history. The idea: a stock's P/E should roughly match its earnings growth rate. If a firm grows at 20% a year, a P/E of 20 is fair (PEG = 1.0). Below 1.0 means it's cheap for its growth. Above 1.0 suggests it's pricey. We use this to find what price growth justifies.

Question 4

What is a Discounted Cash Flow model?

Accepted Answer

A DCF model estimates what a company is worth today based on future earnings. The core idea: a dollar earned later is worth less than one earned now — because you could invest it today. The model forecasts future earnings, turns them into a future stock price, then brings that price back to today using a required return. Our version uses earnings per share and the sector's median P/E to keep it clear and repeatable.

Question 5

Where does the data come from?

Accepted Answer

Every number comes from the company's official SEC filings (10-K and 10-Q reports) via Tiingo, a trusted financial data provider. We show the exact filing date, source, and refresh time for each input. Nothing is typed in by hand, scraped, or guessed.

Question 6

What does "model fitness" mean?

Accepted Answer

Model fitness shows how well a valuation method fits the stock you're checking. Not all models work for all firms. The Graham Number fits asset-heavy firms like banks — it often undervalues tech firms whose value is in ideas. The PEG Ratio works best for firms with steady growth. We check each model's fitness based on sector, profit stability, and finances, so you know which results to trust more.

Question 7

Why do the three models give different values?

Accepted Answer

Each model sees the company differently. The Graham Number looks at current earnings and assets — it's cautious and backward-looking. The PEG Ratio focuses on growth — it rewards fast growers. The Earnings-Based DCF looks ahead — it's forward-looking and depends on assumptions. When all agree, it's a strong sign. When they differ, it often means the company has traits (like high growth or unstable earnings) that some models handle better. We show agreement and fitness so you can judge which signals matter.

Question 8

What is the "hope premium" on the chart?

Accepted Answer

The hope premium is the space between a stock's market price and its formula-based fair value. When price is much higher than fair value, buyers are paying extra for expected future growth that current numbers don't yet show. This isn't always bad — great investments often trade at a hope premium. But it means you're paying for expectations, and if those expectations aren't met, the price can drop fast.

Question 9

Can I change the assumptions?

Accepted Answer

Yes. Click "Customize assumptions" to change any auto-filled input — growth rate, discount rate, projection period, or P/E multiple. The models update instantly. For more control, the DCF Calculator offers a full model with free cash flow, growth decay, terminal value, and scenario testing.

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