Value Investing Screener
Estimate intrinsic value and margin of safety using a simplified discounted earnings model. Enter key fundamentals and assumptions to see whether a stock appears undervalued, fairly valued, or overvalued, along with a year-by-year valuation schedule.
Value investing valuation formulas
The value investing screener uses a simplified discounted earnings framework to estimate intrinsic value. It projects earnings per share (EPS) forward using your growth assumption, adds dividends, and discounts those cash flows back using your required rate of return. A terminal value based on a chosen price-to-earnings (P/E) multiple is added at the end of the horizon.
1. EPS growth projection
Growth rate (decimal) = Expected annual EPS growth (%) ÷ 100
Projected EPS in year n:
EPSₙ = EPS₀ × (1 + Growth rate)ⁿ
EPS₀ is the current earnings per share. Each year, EPS is grown by your chosen rate. This creates a simple forward earnings path that feeds into the valuation model.
2. Discount rate and present value factor
Discount rate (decimal) = Required rate of return (%) ÷ 100
Present value factor for year n:
PV factorₙ = 1 ÷ (1 + Discount rate)ⁿ
The discount rate represents the return you demand for taking on the risk of owning the stock. Higher discount rates reduce the present value of future cash flows, reflecting greater uncertainty or risk.
3. Annual cash flow to shareholders
Dividend per share (assumed constant) = D
Annual cash flow in year n:
CFₙ = EPSₙ + D
Discounted cash flow in year n:
DCFₙ = CFₙ × PV factorₙ
This model treats EPS plus dividends as a proxy for cash flows to shareholders. In practice, more detailed models separate retained earnings, reinvestment, and payout ratios, but this simplified approach keeps the screener intuitive.
4. Terminal value and intrinsic value
Terminal P/E multiple = M
Terminal value in final year N:
TV = EPS_N × M
Discounted terminal value:
DTV = TV × PV factor_N
Intrinsic value per share:
Intrinsic value = Σ (DCFₙ for n = 1 to N) + DTV
The terminal value represents what the market might pay for the company at the end of the horizon, based on your chosen P/E multiple. Adding the discounted terminal value to the sum of discounted cash flows yields an estimate of intrinsic value per share.
5. Margin of safety
Margin of safety (%) = (Intrinsic value − Current price) ÷ Intrinsic value × 100
A positive margin of safety suggests the current price is below your estimate of intrinsic value, while a negative margin indicates the price is above your valuation. Value investors typically look for a substantial margin of safety to account for uncertainty in their assumptions.
These formulas are intentionally simplified. They do not capture all nuances of corporate finance, but they provide a clear, structured way to think about valuation and margin of safety using classic value investing principles.
How to use the value investing screener effectively
Value investing is less about predicting short-term price moves and more about understanding businesses. The screener on this page gives you a structured way to translate your view of a company’s fundamentals into an estimated intrinsic value. By comparing that value to the current market price, you can decide whether a stock deserves a deeper look.
Start with realistic fundamentals
Begin by entering the ticker symbol, current share price, and current earnings per share (EPS). If you have access to financial statements or a trusted data provider, use those numbers rather than rough guesses. You can also enter an estimated annual dividend per share to reflect cash returned directly to shareholders.
Book value per share is optional but can serve as a sanity check. If your intrinsic value estimate is far below book value, it may signal overly pessimistic assumptions—or a business facing serious challenges. If intrinsic value is far above book value, it may reflect strong earnings power or aggressive growth assumptions.
Choose conservative growth and discount rates
The most sensitive inputs in any valuation model are growth and discount rates. For expected EPS growth, consider the company’s history, industry dynamics, and competitive position. Many value investors prefer to err on the side of caution, using modest growth rates even for strong businesses.
Your required rate of return (discount rate) should reflect both the risk of the company and your personal expectations. Higher-risk businesses, cyclical industries, or companies with leveraged balance sheets may warrant higher discount rates. Using a generous discount rate builds a margin of safety into your assumptions.
Set a reasonable horizon and terminal multiple
The valuation horizon determines how many years of earnings and dividends you model. Common choices range from 5 to 10 years. Longer horizons can capture more growth but also introduce more uncertainty. The terminal P/E multiple represents what you think the market might pay for the company at the end of the horizon.
For mature, stable businesses, terminal multiples often cluster around historical averages for the sector. For more speculative companies, using a lower terminal multiple can help avoid overestimating value. The screener lets you experiment with different horizons and multiples to see how sensitive intrinsic value is to these assumptions.
Interpreting the results
Once you click Calculate Value Screen, the tool computes an intrinsic value per share, margin of safety, and a classification: undervalued, fairly valued, or overvalued. It also generates a year-by-year schedule showing projected EPS, cash flows, discounted values, and the terminal value contribution.
If the margin of safety is comfortably positive and the classification is “Undervalued,” the stock may merit further research. If the margin of safety is small or negative, the price may already reflect optimistic assumptions. In either case, the screener is a starting point, not a final verdict.
Worked example
Suppose a company has EPS of $3.20, a current price of $45.50, and pays a $1.00 dividend. You assume 6% annual EPS growth, a 10% discount rate, a 10-year horizon, and a terminal P/E of 15. The screener projects EPS forward, adds the dividend, discounts each year’s cash flow, and calculates a terminal value based on year-10 EPS times 15.
If the resulting intrinsic value is, say, $55 per share, the margin of safety relative to the current price is about 18%. You can then decide whether that margin is sufficient given the company’s risks and your confidence in the assumptions. Adjusting growth, discount rate, or terminal multiple will show how sensitive the valuation is to changes in your view.
Practical tips
- Run multiple scenarios with different growth and discount rates to see a range of intrinsic values.
- Compare the terminal P/E you use with historical averages for the company and its sector.
- Use the CSV export to build a watchlist of candidates with attractive margins of safety.
- Remember that valuation is only one piece of the puzzle—qualitative factors matter too.
- Revisit your assumptions periodically as new information and financial results become available.
Ultimately, the value investing screener is a tool for disciplined thinking. It encourages you to articulate your assumptions, see how they translate into numbers, and make decisions with a clearer view of risk and reward.
Frequently Asked Questions
How accurate is this valuation model?
The model is intentionally simplified. It does not model detailed cash flows, capital expenditures, or changing payout ratios. Its purpose is to give you a structured, transparent way to think about valuation, not to produce precise forecasts. Treat the results as a starting point for deeper analysis.
What if the company has negative earnings?
This version assumes positive EPS. If a company has negative earnings, the discounted earnings approach may not be appropriate. You might consider alternative valuation methods or wait until the business returns to profitability before using this screener.
Can I use different growth rates for different periods?
No. The current version uses a single constant growth rate. You can approximate multi-stage growth by running separate scenarios (for example, higher growth for the first few years and lower growth for the rest) and blending the results in a spreadsheet.
How should I choose the discount rate?
Many investors start with a baseline rate (such as 8–12%) and adjust upward for higher-risk businesses. You can also look at your personal required return or use models like CAPM as a reference. The key is to be consistent and conservative.
Is this tool a recommendation to buy or sell?
No. This screener is for education and planning. It does not consider your full financial situation, risk tolerance, or portfolio context. Always do your own research and consider consulting a qualified advisor before making investment decisions.
Can I export the valuation schedule?
Yes. Use the Export CSV button to download the year-by-year schedule, including projected EPS, cash flows, discounted values, and terminal value. You can analyze it further in a spreadsheet or share it with a coach or advisor.
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