Numeraire DCF Valuator



Where facts conquer fiction. Dig deep for facts. Dig deeper for value.




Interactive graphical models to calculate intrinsic value per share based on expected returns from either cash dividends or free cash flow to common stock owners.

Suitability   |   Non-U.S. Stocks   |   Holdings   |   Annuities

The value of a company or common stock depends on the purpose of the valuation or appraisal. Different estimates of value are suitable for different purposes. The value you want to determine is the value that will help you achieve your goal. Some of the various types of value include the following.

Dead or alive? Dead refers to breakup or liquidation value. Alive refers to going concern value.

Alive "as is" or converted? Alive "as is" refers to a long-term continuing going concern. Converted refers to a going concern with a potential resource conversion event such as a takeover of one company by another, usually predictable and short-term. If the takeover is announced in the financial press, then it could be a candidate for valuation as a short-term risk arbitrage opportunity.

Replaced de novo? De novo refers to the cost to replicate from scratch, or the insurable replacement cost. Many companies are irreplaceable due to their unique assets, both physical and human.

Phase? Venture-capital startup or early-stage financing, initial public offering (IPO), or resource conversion such as mergers and acquisitions (M&A), leveraged buyout (LBO), management buyout (MBO), friendly and hostile takeovers, divestitures, spin-offs, going private, massive refinancings, and bankruptcy reorganizations.

Complex capital structure? Conglomerate, holding company, preferred stock, convertible debt, warrants, stock options, rights, and multiple issues or classes of common stock such as "tracking" shares of subsidiary companies.

Perspective or level of analysis? Total firm, total equity, total common stock equity, and total common stock equity issue or class.

Control? Minority-ownership investment or control investment? The concept of control or influence reflects a continuum and is not always determinable by a simple quantitative measure of the number of shares or proportion of shares owned.

Synergy? Strategic investment by operating company or merely financial portfolio-type investment?

Motivation of valuation? Financial or portfolio investment, strategic or control investment, going public, fairness opinion, estate taxes, gift taxes, litigation, and divorce proceedings.

For any given type of value, the benefit of an accurate estimate is offset by the time and cost to derive it. The DCF Valuator estimate of intrinsic value of a common stock is a rough approximation at best, regardless of its great precision which is necessarily spurious. These simple models are designed for preliminary analysis of financial portfolio investments. They are not recommended for complex businesses such as conglomerates or holding companies, companies with certain kinds of preferred stock outstanding, companies with more than one class of common stock, venture capital startups or early-stage companies, resource conversions, taxes, and litigation. These valuation situations are best handled with models that are fundamentally the same as the simple models but with different emphases.

For example, a company with a preferred stock authorized, issued and outstanding has two types of equity securities and owners with different priority of claims on the company. The senior equity security is the preferred, and the junior equity security is the common. With a preferred stock outstanding, free cash flow to equity (FCFE) applies to both the preferred and the common equity. To determine free cash flow to common stock equity (FCFCE), it is necessary to make an adjustment to exclude the effects of the preferred based on the features of the subject preferred stock issues. The major features to consider are convertible or non-convertible (into common stock), cumulative or non-cumulative dividend, fixed-rate or variable-rate dividend, and dividends paid in cash or in kind (common or preferred stock, either in the subject company or another company). Thus, even a simple valuation of the common stock of a company with one or more preferred stock issues outstanding may require a model that specifically accounts for the features of the preferred.

The DCF Valuator input data forms are short, but the models are not rules of thumb estimates or a back of the envelope calculations. It is designed to give a quick but reasonably accurate approximation of the amount a financial buyer should expect to pay for a non-controlling minority ownership interest in the subject company. The investment models rely on the subject company's financial statements for the most recent fiscal year and on the investor's projection of cash returns for the intended holding period until sale of the stock. The annual cash flows are calculated and discounted back to the present. The value of the business is computed so that the investor can realize a fair rate of return and have a reasonable margin of safety in the form of a current market buying price that represents a discount from the estimated intrinsic value per share.

The DCF Valuator is a suite of investment models to help investors determine the intrinsic value of common stocks and identify stocks that are significantly overpriced or underpriced. The basic principles and techniques used in the DCF Valuator investment models are long known and widely accepted and are used by both serious scholars and finance professionals. 


Non-U.S. Stocks?

Can the DCF Valuator models be used for the common stock of companies not traded in United States markets? Yes. The models can be used to estimate the intrinsic value of any company, whether publicly-traded or private, whether or not fully-reporting to the U.S. SEC, whether pre-IPO (initial public offering) venture capital deal or post-IPO secondary equity market, whether in the U.S. or any other country, whether in U.S. dollars or any other currency using the unit of "Cash" as the universal metric, whether or not pays cash dividends, and with expected long-term growth in free cash flow to common equity or dividends that can be approximated by stylized regular patterns. For projections of less than five years, a more generic standardized model would be better; and for negative free cash flows to common equity and for irregular annual growth, a totally generic spreadsheet program would be better.

The DCF Valuator models use an online price server that automatically accesses market data for U.S. stocks (NYSE, ASE and NASDAQ) only. For non-U.S. stocks, it is necessary to access the price data elsewhere, either online or the financial pages of a newspaper. The first screen of each model contains an input data form that requires a valid Ticker Symbol of a U.S. stock in order to automatically retrieve a current Market Price quote. The values for Ticker Symbol and Market Price can be overridden on the second screen, but to get there it is necessary to use the default Ticker Symbol or any other valid Ticker Symbol in the first screen. The second screen of each model contains the whole input data form automatically populated with the Ticker Symbol and the current Market Price and completed with example default values. Any of these input field values can be selectively overridden with new values for each calculation, thereby making the models applicable to any investment opportunity as long as all of the input values are internally consistent.

Different asset-specific models are better for investments in bonds, real estate, and other investment opportunities. More generally, the Global Value Investing approach to intrinsic "value investing" as defined in the tutorial-style presentation applies to any investment, but the emphasis is on common stock equity.


It is not appropriate to evaluate a holding company, conglomerate, mutual fund, or other heterogeneous multi-industry aggregates as if it were a single homogeneous economic unit. The level of analysis needs to focus on going-concern firms in one industry. The component companies in these holdings can be evaluated individually and then be totaled for an estimate of fair value for the holding. A company may not appear to be a diversified holding at first glance. For example, Berkshire Hathaway, the company of which Warren Buffett is the chief executive officer, is not a single-industry company, but rather a holding company or a quasi-mutual fund because the companies held are more passive portfolio investments than actively-managed operations.


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