Serennity007 Stock Valuation
⚠️ 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 The following analysis uses training-data estimates which may be significantly out of date.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.
Derive a rigorous intrinsic value estimate using multiple independent valuation methodologies, then triangulate to a single probability-weighted target price. Never rely on a single method — cross-validation across DCF, comparable company analysis (CCA), EV/EBITDA, and residual income models builds conviction and exposes assumption fragility.
Overview
Valuation is an art grounded in financial science. Each method has strengths and weaknesses depending on the business type, stage of maturity, and data availability. This skill applies four to five valuation methods, then reconciles them into a football field chart to show the implied value range. Wherever there is consensus across methods, conviction is high. Where methods diverge significantly, that gap tells you something important about market expectations.
When to Use Each Method
Valuation Method Best For Avoid For
────────────────────────────────────────────────────────────────────────────────────
DCF (Free Cash Flow) Mature, FCF-positive businesses Pre-revenue, banks, REITs
Comparable Company (CCA) Any publicly traded company No good public comps
EV/EBITDA Multiple Capital-intensive industrials Asset-light, high-SBC tech
Price/Earnings (P/E) Stable earnings businesses Negative earnings
Price/Sales (P/S) Revenue-stage growth companies Mature high-margin businesses
EV/Revenue High-growth, low-margin SaaS Mature, cyclical businesses
Residual Income (RI) Financial companies, book-value Asset-light businesses
Dividend Discount (DDM) Dividend-paying value stocks Growth stocks, no dividend
Asset-Based NAV Real estate, holding companies Operating businesses
────────────────────────────────────────────────────────────────────────────────────
Method 1: Discounted Cash Flow (DCF)
Step 1: Base Financial Metrics
Collect trailing twelve months (TTM) data:
Base Metrics:
Revenue (TTM): $___M
Operating Cash Flow (TTM): $___M
Capital Expenditures (TTM): $___M
Free Cash Flow (TTM): $___M (OCF - Capex)
FCF Margin (TTM): ___%
Stock-Based Compensation (TTM): $___M
True Economic FCF (SBC-adjusted): $___M
Diluted Shares Outstanding: ___M
Net Debt / (Net Cash): $___M
Effective Tax Rate: ___%
Step 2: Three-Scenario Projections (10-Year)
Scenario Assumptions:
Bull Base Bear
Probability: 20% 60% 20%
Revenue CAGR Y1-5: ___% ___% ___%
Revenue CAGR Y6-10: ___% ___% ___%
FCF Margin Y5: ___% ___% ___%
FCF Margin Y10: ___% ___% ___%
WACC: ___% ___% ___%
Terminal Growth Rate: ___% ___% ___%
Step 3: WACC Calculation
Cost of Equity (CAPM):
Risk-Free Rate (10Y Treasury): ___%
Beta (5-year monthly): ___
Equity Risk Premium: ___%
Size Premium (if applicable): ___%
Cost of Equity: ___% = Rf + β × ERP + Size
Cost of Debt:
Interest Expense (TTM): $___M
Total Debt: $___M
Effective Interest Rate: ___%
Tax Rate: ___%
After-Tax Cost of Debt: ___%
Capital Structure:
Equity Market Cap: $___M
Total Debt: $___M
E/V (Equity Weight): ___%
D/V (Debt Weight): ___%
WACC = Ke × (E/V) + Kd × (D/V) = ___%
Step 4: DCF Valuation Table
10-Year FCF Projection (Base Case):
Year Revenue ($M) FCF Margin% FCF ($M) Discount Factor PV of FCF ($M)
1 ___ ___% ___ ___ ___
2 ___ ___% ___ ___ ___
3 ___ ___% ___ ___ ___
4 ___ ___% ___ ___ ___
5 ___ ___% ___ ___ ___
6 ___ ___% ___ ___ ___
7 ___ ___% ___ ___ ___
8 ___ ___% ___ ___ ___
9 ___ ___% ___ ___ ___
10 ___ ___% ___ ___ ___
────────────────────────────────────────────────────────────────────────────────────
Sum of PV (FCF 1-10): ___
Terminal Value = FCF10 × (1+g) / (WACC-g): ___
PV of Terminal Value: ___
Enterprise Value: ___
Less: Net Debt: ___
Equity Value: ___
Diluted Shares: ___M
DCF Intrinsic Value per Share: $___
TV as % of EV (flag if >75%): ___%
Step 5: Sensitivity Table
Intrinsic Value per Share — WACC vs. Terminal Growth Rate
Terminal Growth Rate
WACC 1.0% 1.5% 2.0% 2.5% 3.0%
6.0% $___ $___ $___ $___ $___
7.0% $___ $___ $___ $___ $___
8.0% $___ $___ $___ $___ $___ ← Base Case
9.0% $___ $___ $___ $___ $___
10.0% $___ $___ $___ $___ $___
Method 2: Comparable Company Analysis (CCA)
Select 5–8 comparable public companies based on:
- Same industry and sub-industry
- Similar business model (SaaS vs. perpetual license, etc.)
- Similar growth profile (high-growth vs. mature)
- Similar size (market cap within 0.5–2.0x range preferred)
Comparable Company Table
Comparable Company Multiples:
Company Mkt Cap EV/Rev EV/EBITDA P/E (FWD) P/FCF EV/FCF Rev Growth% EBITDA Mg%
Target ___ ___ ___ ___ ___ ___ ___% ___%
Peer 1 ___ ___ ___ ___ ___ ___ ___% ___%
Peer 2 ___ ___ ___ ___ ___ ___ ___% ___%
Peer 3 ___ ___ ___ ___ ___ ___ ___% ___%
Peer 4 ___ ___ ___ ___ ___ ___ ___% ___%
Peer 5 ___ ___ ___ ___ ___ ___ ___% ___%
───────────────────────────────────────────────────────────────────────────────────────────────────
Peer Mean ___ ___ ___ ___ ___ ___ ___% ___%
Peer Median___ ___ ___ ___ ___ ___ ___% ___%
CCA Implied Value
Apply peer median multiples to the target's metrics:
CCA Valuation:
Metric Target Value Peer Median Multiple Implied EV/Share Weight
EV/Revenue $___M Rev ___x $___ 25%
EV/EBITDA $___M EBITDA ___x $___ 25%
P/E (Forward) $___ EPS ___x $___ 25%
EV/FCF $___M FCF ___x $___ 25%
────────────────────────────────────────────────────────────────────────────────────
CCA Weighted Average Implied Price: $___
Premium/Discount Applied (for size, quality): ±___%
CCA Adjusted Implied Price: $___
Premium/Discount Adjustment Factors:
- Apply a +10–20% premium if the target has: superior growth, higher margins, stronger balance sheet
- Apply a -10–25% discount if: smaller/less liquid, weaker fundamentals, regulatory overhang
Method 3: EV/EBITDA Multiple Valuation
Simple multiple-based valuation used primarily as a sanity check:
EV/EBITDA Valuation:
TTM EBITDA: $___M
Forward EBITDA (NTM): $___M
Historical EV/EBITDA Average: ___x (5-year own history)
Peer Median EV/EBITDA: ___x
Sector Median EV/EBITDA: ___x
Conservative Multiple (peer discount): ___x
Base Multiple (peer median): ___x
Premium Multiple (peer premium): ___x
Conservative Implied EV: $___M → Per Share: $___
Base Implied EV: $___M → Per Share: $___
Premium Implied EV: $___M → Per Share: $___
Net Debt/(Cash): $___M
Shares Outstanding: ___M
Method 4: Price/Earnings (P/E) Valuation
For companies with stable, growing earnings:
P/E Valuation:
TTM GAAP EPS: $___
NTM Consensus EPS: $___
2-Year Forward EPS: $___
Historical P/E Average (5yr): ___x
Peer Median P/E (NTM): ___x
S&P 500 P/E (NTM): ___x [for context]
PEG Ratio (NTM P/E / Growth): ___ [<1.0 = undervalued, >2.0 = expensive]
Conservative P/E (10% discount to peer): ___x → Implied Price: $___
Base P/E (peer median): ___x → Implied Price: $___
Premium P/E (10% premium to peer): ___x → Implied Price: $___
Method 5: Residual Income / Economic Value Added
For financial companies or businesses where book value is meaningful:
Residual Income Model:
Book Value per Share (current): $___
Cost of Equity (Ke): ___%
Expected ROE (avg next 5 years): ___%
Residual Income (ROE - Ke) × BV: $___
Justified P/B = 1 + (ROE - Ke) / (Ke - g)
= 1 + (___ - ___) / (___ - ___)
= ___x
Book Value per Share: $___
Justified P/B: ___x
Residual Income Implied Price: $___
Football Field Summary — Valuation Range
Present all methods together in a football field chart:
Football Field Valuation Summary — [TICKER]
Current Market Price: $___
Method Bear (Low) Base (Mid) Bull (High) Confidence
────────────────────────────────────────────────────────────────────────────────────
DCF — Bear/Base/Bull $___ $___ $___ HIGH/MED/LOW
CCA — Peer Multiples $___ $___ $___ HIGH/MED/LOW
EV/EBITDA Multiple $___ $___ $___ HIGH/MED/LOW
P/E Multiple $___ $___ $___ HIGH/MED/LOW
Residual Income (if used) $___ $___ $___ HIGH/MED/LOW
52-Week Range $___ ───────── $___ [Market]
Analyst Consensus $___ $___ $___ [Street]
────────────────────────────────────────────────────────────────────────────────────
COMPOSITE INTRINSIC VALUE $___ $___ $___
Visual Football Field:
$[low] |────────[bear range]────|────────[base range]────|────────[bull range]────| $[high]
▲
Current Price $___
Composite Valuation Calculation
Method Weighting (adjust based on applicable methods):
DCF Valuation: ___% weight Implied: $___
CCA (Comps): ___% weight Implied: $___
EV/EBITDA Multiple: ___% weight Implied: $___
P/E Multiple: ___% weight Implied: $___
Residual Income: ___% weight Implied: $___
─────────────────────────────────────────────────────────
Composite Weighted IV: $___
Current Market Price: $___
Margin of Safety: ___% (discount to IV)
Upside/Downside Potential: ___%
Margin of Safety Framework
Margin of Safety = (Intrinsic Value − Market Price) / Intrinsic Value × 100%
Assessment:
>30% discount to IV → Compelling value — strong margin of safety
10–30% discount → Fair value — reasonable entry
0–10% discount → Fairly priced — limited margin of safety
10–30% premium → Slightly expensive — requires growth conviction
>30% premium → Expensive — priced for perfection
>50% premium → Very expensive — significant risk of multiple compression
Investor Type Minimums:
Deep Value: 25–35% margin of safety required
GARP: 10–20% margin of safety
Growth: 0–10% (or slight premium for high-quality growth)
Momentum: Not applicable
Risk-Adjusted Expected Return
Calculate the expected return across scenarios:
Expected Return Analysis:
Scenario Probability Price Target Return vs. Current Expected Return
────────────────────────────────────────────────────────────────────────────────
Bull ___% $___ +___% ___% contribution
Base ___% $___ +/-___% ___% contribution
Bear ___% $___ -___% ___% contribution
────────────────────────────────────────────────────────────────────────────────
Probability-Weighted Expected Return: ___%
Risk/Reward Ratio: [Bull upside] / [Bear downside] = ___x
(Good investments typically offer 3:1 or better risk/reward)
Analyst Consensus vs. Intrinsic Value
Street vs. Model Comparison:
Analyst Consensus Target (Mean): $___
Analyst Consensus Target (High): $___
Analyst Consensus Target (Low): $___
# Analysts covering: ___
Buy / Hold / Sell ratings: ___ / ___ / ___
Our Composite IV: $___
vs. Consensus Mean: ___% [premium/discount]
Interpretation:
- Model > Consensus: Market may be underestimating growth/margin potential
- Model < Consensus: Street may be pricing in too-optimistic assumptions
- Large divergence: Investigate the key assumption difference
Deep DCF Modeling
This section provides the full step-by-step DCF construction methodology for analysts who need a more rigorous, first-principles build. Use this when the quick DCF in Method 1 above requires deeper documentation, when running a standalone DCF, or when preparing material for an investment committee.
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):
Use industry-appropriate EV/FCF multiples from comparable mature companiesTV = FCFₙ × (EV / FCF exit multiple) - 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, the model is more speculation than analysis. Stress-test terminal assumptions aggressively.
- WACC too low: Using a WACC below the risk-free rate, or ignoring size/liquidity premiums for smaller companies, artificially inflates intrinsic value.
- Ignoring cyclicality: Using peak FCF margins as the base for a cyclical business. Always normalize FCF through a full business cycle.
- Ignoring stock-based compensation: SBC is a real, dilutive cost. Subtract it from operating cash flow when calculating true economic FCF.
- Single scenario thinking: Presenting only a base case. Always run Bull, Base, and Bear scenarios with explicit assumption differences.
- Hidden working capital and capex changes: Rapidly growing companies often consume significant working capital. Ensure this drag is reflected in FCF projections, not hidden in operating cash flow.
- Currency and geographic mix: For international businesses, project by geography and apply appropriate discount rates by region.
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 (e.g., software, consumer brands)
- Companies with 10+ years of FCF generation history
- Businesses where future cash flows are reasonably bounded (regulated utilities, subscription SaaS)
When DCF is less reliable (use relative valuation instead):
- Early-stage growth companies with no positive FCF yet — value lies in future optionality
- Highly cyclical businesses where normalizing FCF requires significant judgment
- Financial companies (banks, insurance, REITs) — use Price/Book, Price/Earnings, or dividend discount models instead
- Companies with lumpy or unpredictable capex cycles
- Turnaround situations where the path to profitability is uncertain
Input Formats
# Auto-calculate from public financial data
/stock-valuation AAPL
# Specify methods to use
/stock-valuation MSFT --methods dcf,cca,ev-ebitda
# Full multi-method analysis with visual output
/stock-valuation NVDA --full --visual
# Quick single-method valuation
/stock-valuation GOOGL --method dcf --quick
# Custom assumption overrides
/stock-valuation AMZN --growth 15% --wacc 9% --terminal 2.5%
# Compare multiple stocks
/stock-valuation AAPL,MSFT,GOOGL --compare
# With peer set specification
/stock-valuation META --peers SNAP,PINS,TWTR,RDDT
Output Summary
Complete valuation report including:
- Business Summary: One-paragraph description of the business model and competitive position
- Method Selection Rationale: Why each method was selected or excluded
- DCF Analysis: Full 10-year projections, WACC decomposition, sensitivity table (3 scenarios)
- Comparable Company Analysis: Peer table with multiples and implied values
- Multiple-Based Valuations: EV/EBITDA, P/E, P/FCF implied ranges
- Football Field Chart: Visual range of all methods
- Composite Intrinsic Value: Weighted average across all methods
- Margin of Safety Assessment: Discount/premium to current price
- Risk-Adjusted Expected Return: Scenario-weighted expected return calculation
- Key Valuation Risks: What assumptions could most materially change the outcome
- Analyst Consensus Comparison: How model compares to Street consensus
Standard Signal Output
All analysis concludes with this standardized block:
## 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 ║
╚══════════════════════════════════════════════╝
Score Guide: 8.0–10.0 Strongly Bullish | 6.0–7.9 Moderately Bullish | 4.0–5.9 Neutral | 2.0–3.9 Moderately Bearish | 0.0–1.9 Strongly Bearish Confidence: HIGH (strong data, clear signals) | MEDIUM (mixed signals) | LOW (limited data, conflicting signals) Horizon: SHORT-TERM (1 week–3 months) | MEDIUM-TERM (3 months–1 year) | LONG-TERM (1+ years)