Five different ways to value a stock, when to use each, and how to triangulate them into a defensible price target. Practical workflow used at every long-only fund.
Equity analysts, sell-side associates, MBA students with intro finance.
By the end you will…
Value any company using DDM, multi-stage DDM, FCFE, FCFF/DCF, and comparable multiples.
Compute a defensible WACC and use it as the discount rate.
Triangulate multiple methods into a fair-value range, not a single number.
Sense-check valuation against the SML and its implied required return.
Stock vs S&P benchmark — does the realized record support the thesis?
Sharpe
0.85
vs 0.66
Treynor
0.072
vs 0.060
Jensen α
+1.2%
vs —
Apply what you learned
Real-world scenarios that pull together the path. Each links back to the Labs you just used.
Case Study
Triangulating a fair value for AAPL: 3 methods, 1 conviction
Apple trades at $185. A multi-stage DDM with the current $1.00 dividend, 8% growth for 5y then 3% terminal, and a 9.5% required return → $145. A FCFF/DCF with explicit FCF projections, 8.5% WACC, and 2.5% terminal growth → $172. Comparable analysis using a 28× P/E (median of MSFT, GOOGL, MSI) on $7.50 EPS → $210. Three methods give a $145-$210 range; the centroid is ~$175, suggesting AAPL at $185 is fairly to slightly overvalued — a HOLD, not a screaming BUY. The Stock Valuation Lab runs all three methods side by side with your custom inputs.
When DCF lies: why high-growth tech needs a real-options overlay
Run a 'standard' DCF on a hyper-growth name like SHOP at 25% revenue growth, 15% terminal margins, 10% WACC → some massive number that depends entirely on terminal-value assumptions (which can be 80% of intrinsic value). Sensitivity-test by walking WACC from 9% to 12% and terminal growth from 2% to 4% — you'll see fair value swing 3x. Lesson: DCF is necessary but insufficient for growth names. Triangulate with EV/Sales multiples vs growth-stage peers and use an SML check on realized β. The Stock Valuation Lab's sensitivity tab makes this quick.