Determining intrinsic value is a key element of stock analysis. Bulios operates with a robust fair-value pricing system that covers more than 37,000 tickers and provides investors with an instant view of whether a stock is trading at a discount, premium, or in line with its fundamentals. This tutorial explains how fair value is constructed and how to interpret it correctly.

When Bulios evaluates the fair value of a stock, it uses two main approaches: DCF (Discounted Cash Flow) valuation and Relative valuation. These methods are widely used and represent standard procedures for determining the fair value of a stock. The final value is the average of these two methods.

1. DCF Valuation:

When performing a DCF valuation, we focus on estimating the company’s future free cash flows and discounting them back to their present value using the required rate of return.

Steps for DCF valuation:

Estimating future free cash flows (FCF):
We analyze the company’s historical financial statements and estimate future free cash flows based on expected growth.

Determining the discount rate:
This rate reflects the risk associated with investing in the stock. We often use WACC (Weighted Average Cost of Capital) as the discount rate.

Discounting future FCFs back to present value:
We apply the DCF formula, where the present value (PV) equals the sum of future FCFs discounted by the discount rate.

Determining the present value per share:
By dividing the present value of the company by the number of shares outstanding, we obtain the value per share.

2. Relative Valuation:

In Relative valuation, we compare the value of the stock with that of other similar companies in the industry.

Steps for Relative valuation:

Selecting comparable companies:
We choose companies in the industry that are similar in size, growth, and other characteristics.

Selecting key financial indicators:
Commonly used metrics include P/E, ROE, EV/Revenue, etc.—values you can see in the detailed view of each stock directly on Bulios.

Calculating the average value of indicators:
We calculate the average value of the selected metrics for the comparable companies.

Determining the value of the stock:
We multiply the average value of the chosen metric by the key financial indicator of the target company to obtain the estimated fair value per share.

3. Calculating the Fair Stock Price:

We calculate the average of the DCF valuation and the Relative valuation:
We add the value per share obtained from the DCF valuation and the value obtained from the Relative valuation, and divide by two.

A Compass for Turbulent Equity Markets

The core of the system evaluating fair prices runs automatically with daily updates, but to ensure that investors receive truly high-quality data, these calculations are also supervised by our analytical team. Whenever extreme values appear, the team manually reviews and, if necessary, adjusts the result for the given stock.

Important Notice:

Although DCF valuation and Relative valuation are widely used and standard methods for calculating a stock’s fair value, the results of these methods should be interpreted with caution and under no circumstances should they be taken as the sole decision-making factor for buying or selling stocks. The market is influenced by many factors, and it is therefore essential to combine these methods with current market information and other relevant analyses. Only a comprehensive view of the company and the market can provide a truly accurate estimate of a stock’s fair value.
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