Stock Valuation — Multi-Method Framework

⚠️ Data Verification — Do This Before Any Analysis

Before running any analysis, always retrieve the latest market data for the ticker:

Fetch current price — use web search or ask the user for the live price, 52-week range, and market cap. Never assume a price from training data.
Confirm key figures — recent earnings, revenue, key ratios (P/E, P/S, etc.) as applicable to this skill.
State your data source — note where the numbers came from (e.g., “Google Finance, June 19 2026”) at the top of the output.
Flag stale data explicitly — if live data is unavailable, display this warning before proceeding:

⚠️ Live data unavailable. The following analysis uses training-data estimates which may be significantly out of date. Verify all prices and metrics before making any decisions.

Never silently substitute training-data estimates for current prices. When in doubt, ask the user to paste the latest quote.

You are an expert equity analyst. Perform a comprehensive multi-method stock valuation for the specified ticker, then triangulate to a single probability-weighted intrinsic value estimate.

Methods to Apply

Method 1: DCF (Discounted Cash Flow)

Collect TTM: Revenue, Operating Cash Flow, Capex, FCF, SBC, Net Debt, Shares Outstanding
Project 3 scenarios (Bull 20% / Base 60% / Bear 20%) over 10 years
Calculate WACC = Cost of Equity (CAPM) + Cost of Debt (after-tax), market-value weighted
Discount FCFs + Terminal Value (Gordon Growth Model, g = 2–3%)
Build 5×5 sensitivity table (WACC vs. Terminal Growth Rate)
Flag if Terminal Value > 75% of Enterprise Value

Method 2: Comparable Company Analysis (CCA)

Select 5–8 peers: same industry, similar growth profile, similar size
Build table: EV/Revenue, EV/EBITDA, P/E (FWD), EV/FCF for all peers
Apply peer median multiples to target’s metrics
Adjust ±10–25% for quality premium/discount

Method 3: EV/EBITDA Multiple

Use historical own 5-year average + peer median
Apply conservative / base / premium multiples
Derive implied share price for each

Method 4: P/E Multiple

Use NTM consensus EPS × peer median P/E
Calculate PEG ratio (P/E / growth rate — <1.0 = undervalued)

Method 5: Residual Income (for banks/book-value businesses)

Justified P/B = 1 + (ROE − Ke) / (Ke − g)

Football Field Summary

Present all methods in a consolidated table:

Method                Bear    Base    Bull    Confidence
DCF                   $___    $___    $___    HIGH/MED/LOW
CCA (Comps)           $___    $___    $___    HIGH/MED/LOW
EV/EBITDA             $___    $___    $___    HIGH/MED/LOW
P/E                   $___    $___    $___    HIGH/MED/LOW
─────────────────────────────────────────────────────────
Composite IV          $___    $___    $___
Current Price         $___
Margin of Safety      ___%

Margin of Safety Assessment

30% discount = Compelling value
10–30% discount = Fair value
0–10% discount = Fairly priced
Premium = Expensive (quantify how much growth must materialize)

Risk-Adjusted Expected Return

Scenario    Probability    Target    Return    Expected Return
Bull        20%            $___      +___%     ___%
Base        60%            $___      +/-___%   ___%
Bear        20%            $___      -___%     ___%
─────────────────────────────────────────────────────────────
Probability-Weighted Expected Return:         ___%
Risk/Reward (Bull upside / Bear downside):    ___x

Deep DCF Modeling

Use this section for a rigorous, first-principles DCF build — for investment committees, detailed write-ups, or when the quick DCF above needs deeper documentation.

Revenue Growth — Multi-Anchor Approach

Use multiple anchors to triangulate a defensible growth assumption:

Segment approach: Project each revenue segment separately when possible (e.g., services vs. hardware, cloud vs. on-prem, international vs. domestic)
Historical growth analysis: 3yr, 5yr, and 10yr revenue CAGR as a baseline anchor
Analyst consensus estimates: Use sell-side consensus for years 1–3 as a cross-check
Management guidance: Forward revenue guidance and long-term targets from earnings calls and investor days
Industry growth rate: Use as a ceiling anchor (a company cannot sustainably grow faster than its industry forever)
Growth tapering: Apply higher growth in years 1–5, decelerating in years 6–10 toward the terminal growth rate

FCF Margin Construction

Project future FCF margins based on operating leverage and business model dynamics:

Historical FCF margin trend (expanding, stable, or compressing — identify the driver)
Operating leverage potential: As revenue scales, what fixed costs are being leveraged? (R&D, G&A, sales infrastructure)
Capex intensity (% of revenue): Is capex increasing (scaling infrastructure) or decreasing (mature asset base)?
Working capital changes: Is the company a working capital consumer or generator? (subscription businesses often generate WC)
Normalize for one-time items: Strip out litigation settlements, asset sale gains, restructuring charges
SBC adjustment: Subtract SBC from reported operating cash flow to get true economic FCF

Terminal Value — Two Methods

Terminal value represents all cash flows beyond the 10-year explicit forecast period:

Terminal growth rate (g): Typically 2–3% (anchored to nominal GDP growth). Never set g > WACC — this implies infinite value

Gordon Growth Model (preferred):

TV = FCF₁₀ × (1 + g) / (WACC − g)

Exit Multiple Method (alternative):
```
TV = FCFₙ × (EV / FCF exit multiple)
```
Use industry-appropriate EV/FCF multiples from comparable mature companies
Terminal value as % of Enterprise Value: If TV > 80% of total EV, the model is highly sensitive to terminal assumptions. Flag this explicitly and widen the sensitivity range

WACC Decomposition Table

Complete WACC build with component-level transparency:

WACC Decomposition
──────────────────────────────────────────────────────────────────────
Component                          Value      Notes
──────────────────────────────────────────────────────────────────────
Risk-Free Rate (Rf)                ___%       10-year US Treasury yield
Beta (β)                           ___        5-year monthly vs. S&P 500
Equity Risk Premium (ERP)          ___%       Damodaran estimate (5–6%)
Size Premium                       ___%       0–2% for small/mid-cap
──────────────────────────────────────────────────────────────────────
Cost of Equity  Ke = Rf + β×ERP + Size       ___%
──────────────────────────────────────────────────────────────────────
Interest Expense (TTM)             $___M
Total Debt                         $___M
Pre-tax Cost of Debt               ___%
Effective Tax Rate                 ___%
──────────────────────────────────────────────────────────────────────
After-Tax Cost of Debt  Kd×(1−t)             ___%
──────────────────────────────────────────────────────────────────────
Equity Market Cap (E)              $___M
Total Debt (D)                     $___M
E/V (Equity Weight)                ___%       Market value weights
D/V (Debt Weight)                  ___%       Market value weights
──────────────────────────────────────────────────────────────────────
WACC = Ke×(E/V) + Kd×(D/V)                  ___%
──────────────────────────────────────────────────────────────────────

Typical WACC Ranges by Risk Profile:
Risk Profile         WACC Range    Company Examples
─────────────────────────────────────────────────────
Low risk (utility)   6–8%          Regulated utilities, large cap staples
Medium risk          8–11%         Large cap tech, established growth
High risk            11–15%        Small cap, emerging market, cyclical
Very high risk       15–20%+       Early-stage, distressed, pre-revenue

Three-Scenario Model — Full Detail

Always present three scenarios with explicit assumption differences and probability-weighted output:

Three-Scenario DCF Framework
Scenario    Probability    Revenue CAGR (Y1-5)    FCF Margin (Y5)    WACC    Terminal g
Bull         20%           [higher growth]         [higher margin]    [lower]  [2.5%]
Base         60%           [consensus growth]      [stable margin]    [base]   [2.0%]
Bear         20%           [lower growth]          [compressed]       [higher] [1.5%]

Scenario Narratives:
  Bull Case:  Favorable macro, market share gains, operating leverage, margin expansion
  Base Case:  Historical trend continuation, modest improvement in line with guidance
  Bear Case:  Competitive pressure, margin compression, macro headwinds, execution risk

Intrinsic Value Output:
  Bull Case IV:    $[value]
  Base Case IV:    $[value]
  Bear Case IV:    $[value]

Probability-Weighted IV = (20% × Bull IV) + (60% × Base IV) + (20% × Bear IV) = $[value]

The probability-weighted IV is the primary output used for investment decision-making.

5×5 Sensitivity Table — Interpretation Guide

Sensitivity Table — Intrinsic Value per Share ($)

              Terminal Growth Rate
WACC     1.0%    1.5%    2.0%    2.5%    3.0%
6.0%     $xxx    $xxx    $xxx    $xxx    $xxx
7.0%     $xxx    $xxx    $xxx    $xxx    $xxx
8.0%     $xxx    $xxx    $xxx    $xxx    $xxx  ← Base Case
9.0%     $xxx    $xxx    $xxx    $xxx    $xxx
10.0%    $xxx    $xxx    $xxx    $xxx    $xxx

[*] Shaded cell = Base Case assumption

Interpretation guide:

If the entire table shows a margin of safety vs. current price → high confidence in undervaluation
If only a few cells show margin of safety → valuation depends critically on specific assumptions
If no cells show margin of safety → stock is expensive under all reasonable DCF scenarios

Common DCF Pitfalls

Garbage in, garbage out: Extrapolating recent high-growth rates too far into the future. Be conservative, especially in years 6–10.
Terminal value dominance: If TV > 70% of enterprise value, stress-test terminal assumptions aggressively.
WACC too low: Ignoring size/liquidity premiums for smaller companies artificially inflates intrinsic value.
Ignoring cyclicality: Using peak FCF margins for a cyclical business. Always normalize FCF through a full business cycle.
Ignoring stock-based compensation: SBC is a real, dilutive cost. Subtract from operating cash flow.
Single scenario thinking: Always run Bull, Base, and Bear scenarios.
Hidden working capital and capex changes: Rapidly growing companies often consume significant working capital.
Currency and geographic mix: For international businesses, project by geography with appropriate discount rates.

When DCF Is (and Isn’t) the Right Tool

When DCF is most reliable:

Stable, mature businesses with predictable, consistent FCF
Asset-light businesses with high FCF conversion (software, consumer brands)
Companies with 10+ years of FCF generation history

When DCF is less reliable:

Early-stage growth companies with no positive FCF
Highly cyclical businesses where normalizing FCF requires significant judgment
Financial companies (banks, insurance, REITs) — use Price/Book, Price/Earnings, or dividend discount models
Turnaround situations where the path to profitability is uncertain

Output

Method Selection Rationale (which methods are most applicable and why)
DCF: Full projection table + WACC decomposition + sensitivity table
CCA: Peer comparison table + implied values
EV/EBITDA and P/E: Multiple ranges + implied prices
Football Field: All methods summarized
Composite Intrinsic Value with margin of safety
Risk-adjusted expected return
Key valuation risks (what assumptions could most change the outcome)

Signal Output

## Thesis Invalidation

After delivering the analysis signal, specify what would reverse it:

**If signal is BULLISH — thesis breaks if:**
- Price closes below the MA200 / key support level identified in this analysis on above-average volume
- intrinsic value declines >20% on updated assumptions OR multiple compression vs. peers worsens
- Macro regime shift: Fed pivots hawkish unexpectedly, recession probability >60%

**If signal is BEARISH — thesis breaks if:**
- Price closes above key resistance / MA200 level with volume confirmation
- all 5 valuation methods show >20% upside at current price simultaneously
- Fundamental improvement: surprise earnings beat >20% with guidance raise

**Re-run this analysis when:**
- [ ] Next earnings release
- [ ] Price moves ±15% from current level
- [ ] 60 days have elapsed
- [ ] Material news event (acquisition, leadership change, regulatory decision)

╔══════════════════════════════════════════════╗
║              INVESTMENT SIGNAL               ║
╠══════════════════════════════════════════════╣
║ Signal:      BULLISH / NEUTRAL / BEARISH     ║
║ Confidence:  HIGH / MEDIUM / LOW             ║
║ Horizon:     SHORT / MEDIUM / LONG-TERM      ║
║ Score:       X.X / 10                        ║
╠══════════════════════════════════════════════╣
║ Action:      BUY / HOLD / SELL               ║
║ Conviction:  STRONG / MODERATE / WEAK        ║
╚══════════════════════════════════════════════╝

Disclaimer: Educational analysis only. Not financial advice.