Methodology
Open a method below to understand its origin, assumptions, strengths, limitations and the exact way Template v9 applies it. Actual company calculations remain separate under Valuation Methods.
Method library
Choose a method to expand its full explanation
Each dropdown separates the method’s general theory from the specific implementation used by this platform.
What it measures
Cash Yield is an additional decision signal. It is displayed alongside the valuation results but is not included in the six-method valuation average or median.
Origin and attribution
Cash-flow yield has no single recognized inventor. It developed as the yield-form counterpart of price-to-cash-flow and price-to-free-cash-flow multiples. Because ‘cash yield’ has several meanings, this model defines it explicitly as the average of Free Cash Flow yield and Owner Earnings yield, both measured against market capitalization.
Key assumptions
- Free Cash Flow and Owner Earnings are representative after unusual capital spending, working-capital movements and cycle effects are considered.
- The cash-flow numerator and equity-market-value denominator describe the same claim and use consistent periods and units.
- The long-term government-bond average is a useful opportunity-cost benchmark, while the signal remains separate from intrinsic fair value.
Advantages
- Focuses on cash generated after reinvestment rather than accounting earnings alone.
- Expresses valuation as an intuitive percentage that is easy to compare through time.
- Provides a quick cash-return signal alongside the six intrinsic-value estimates.
Limitations
- Free cash flow can be volatile or negative because of capex, acquisitions, working capital or cyclicality.
- A high yield can reflect genuine undervaluation, but it can also signal deterioration or distress.
- Cash-yield definitions differ across providers and are often less useful for financial companies.
How Template v9 applies it
Calculate both cash yields
Free Cash Flow and Owner Earnings are each divided by market capitalization for every fiscal year.
Create the annual average
The model averages the two cash yields for each of the five years.
Compare with bonds
The latest average cash yield is compared with the average U.S. and EU 30-year government bond yield.
Output: A latest-year cash yield and a separate buy / do-not-buy signal.
This signal never changes the valuation average, valuation median or shared margin of safety.
Key inputs
Sources and further reading
Theory here; the company-specific numbers remain under Valuation Methods.
View live calculationWhat it measures
This method focuses on cash that can economically be attributed to owners after the company’s operating and reinvestment needs.
Origin and attribution
Warren Buffett introduced the term ‘owner earnings’ in Berkshire Hathaway’s 1986 shareholder letter. Discounting those owner earnings combines Buffett’s cash-flow definition with the present-value tradition associated with John Burr Williams; DOE is not a separate standardized model with one additional inventor.
Key assumptions
- Maintenance capex and the working capital needed to preserve the company’s competitive position can be estimated reliably.
- Growth is supported by realistic reinvestment and returns on that reinvestment; growth investment is not silently omitted.
- The required return, 20-year projection, slow-growth phase, net worth, debt and diluted shares are internally consistent.
Advantages
- Centers value on cash economically attributable to owners rather than reported profit alone.
- Explicitly charges the company for maintaining productive capacity.
- Makes capital intensity and reinvestment economics visible in the valuation.
Limitations
- Maintenance capex is not separately disclosed under GAAP and can require significant judgment.
- Long-term growth and the required return can materially change the outcome.
- The method is difficult for early-stage, cyclical, acquisitive and financial businesses.
How Template v9 applies it
Establish base earnings
The model uses the average Owner Earnings from the latest three fiscal years.
Project and discount
Years 0–20 are discounted at the required return, which defaults to 9%. Years 1–5 use the supplied growth override or, when no override is supplied, automatic sustainable growth. Years 6–20 use 2.5% slow growth.
Move from enterprise to equity
Anchor-year net worth is added, total debt is deducted and the result is divided by diluted shares.
Output: An intrinsic value per share and a buy-under price after the shared margin of safety.
Automatic growth is the median of sustainable growth (reinvestment ratio × CROIC), historical growth and CROIC, with a 0% floor and 20% cap. An optional override replaces that rate in projected years 1–5; year 0 remains the un-grown base value.
Key inputs
Sources and further reading
Theory here; the company-specific numbers remain under Valuation Methods.
View live calculationWhat it measures
This method concentrates on cash remaining after operating expenses and capital expenditures.
Origin and attribution
Present-value reasoning predates modern finance and has no single inventor. John Burr Williams’s 1938 book The Theory of Investment Value is widely associated with modern equity DCF; later academics and practitioners developed today’s FCFF and FCFE frameworks.
Key assumptions
- The normalized base Free Cash Flow and projected growth represent the company’s future operating economics.
- Cash flow, required return, inflation, currency and leverage are treated consistently throughout the projection.
- Long-run growth is sustainable and remains below the required return; the template’s net-worth and debt bridge is applied consistently.
Advantages
- Estimates intrinsic value from company fundamentals without requiring peer-market prices.
- Makes growth, reinvestment and required-return assumptions explicit and testable.
- Works for companies that do not pay dividends, provided usable cash flow exists.
Limitations
- Results are highly sensitive to growth rates and the required return.
- Long-range projections can create false precision when distant cash flows dominate value.
- Negative or unstable cash flow makes the method weak for young, cyclical or rapidly changing companies.
How Template v9 applies it
Establish base cash flow
The model uses the average Free Cash Flow from the latest three fiscal years.
Project and discount
Years 0–20 are discounted at the required return, which defaults to 9%. Years 1–5 use the supplied growth override or, when no override is supplied, automatic sustainable growth. Years 6–20 use 2.5% slow growth.
Calculate equity value
Anchor-year net worth is added, total debt is deducted and the remaining equity value is divided by diluted shares.
Output: An intrinsic value per share and a buy-under price after the shared margin of safety.
Automatic growth is the median of sustainable growth (reinvestment ratio × CROIC), historical growth and CROIC, with a 0% floor and 20% cap. An optional override replaces that rate in projected years 1–5; year 0 remains the un-grown base value.
Key inputs
Sources and further reading
Theory here; the company-specific numbers remain under Valuation Methods.
View live calculationWhat it measures
This method provides a market-multiple perspective alongside the cash-flow and earnings-based valuations.
Origin and attribution
No sole inventor of EV/EBITDA is documented. EBITDA was popularized in telecommunications and leveraged-finance analysis, while the enterprise-value multiple developed collectively among analysts and became prominent in 1980s buyout work.
Key assumptions
- The selected multiple reflects companies with broadly comparable growth, risk, capital intensity and returns on invested capital.
- EBITDA is positive, sustainable and measured consistently after reviewing one-offs and aggressive add-backs.
- Enterprise-value components, leases, cash and debt are treated consistently; this platform follows Template v9’s configured company-value calculation exactly.
Advantages
- Makes operating comparisons less dependent on financing structure and tax differences.
- Can remain usable when net income is negative but EBITDA is positive.
- Provides a fast market-multiple perspective beside cash-flow valuations.
Limitations
- EBITDA is not cash flow because it omits capex, working capital and cash taxes.
- Adjusted EBITDA and enterprise-value definitions can vary materially between companies.
- One multiple compresses growth, quality, risk and cyclicality and can reproduce peer-market mispricing.
How Template v9 applies it
Calculate EBITDA
Anchor-year operating income, total depreciation and total amortization are added together.
Apply the company multiple
EBITDA is multiplied by the configured EV / EBITDA company multiple.
Calculate the per-share value
The resulting company value is divided by anchor-year diluted shares.
Output: A value per share, observed EV / EBITDA multiple and shared-M.O.S. buy-under price.
Key inputs
Sources and further reading
Theory here; the company-specific numbers remain under Valuation Methods.
View live calculationWhat it measures
This method translates a normalized earnings estimate into a per-share value using the verified Graham formula.
Origin and attribution
The heuristic is attributed to Benjamin Graham and appeared in the 1962 fourth edition of Security Analysis. A later version added the bond-yield adjustment. Graham presented it as a shorthand illustration of growth-stock calculations—not as a guarantee of a company’s true value.
Key assumptions
- Normalized EPS is positive and represents sustainable earning power rather than a cyclical peak or one-off gain.
- The selected growth rate can reasonably persist for roughly seven to ten years.
- The fixed 8.5 base multiple, the 2× growth factor and the historical 4.4% reference yield remain useful calibration choices.
Advantages
- Simple, transparent and easy to reproduce with a small number of inputs.
- Links earnings value explicitly to growth and corporate-bond yields.
- Useful as a screening and sensitivity tool for profitable, stable companies.
Limitations
- The output is highly sensitive to growth and bond-yield inputs.
- The formula ignores debt, cash, capex, working capital, dilution and competitive durability.
- Historically calibrated constants can create false precision for volatile or structurally different companies.
How Template v9 applies it
Forecast EPS
A linear regression of the five diluted EPS values forecasts one year ahead.
Normalize EPS
The regression forecast and the median-growth estimate are averaged into Normal EPS.
Apply the Graham formula
Normal EPS is adjusted for the automatic Free Cash Flow growth rate, capped at 15%, plus the reference yield and current AAA bond yield.
Output: A Benjamin Graham value per share and shared-M.O.S. buy-under price.
Key inputs
Sources and further reading
Theory here; the company-specific numbers remain under Valuation Methods.
View live calculationWhat it measures
EPV normalizes operating performance across five years and capitalizes that earnings power at the configured cost of capital.
Origin and attribution
The named EPV framework was formalized and popularized by Columbia professor Bruce Greenwald and coauthors in Value Investing: From Graham to Buffett and Beyond. It builds on the broader Graham–Dodd tradition of valuing proven earning power separately from growth.
Key assumptions
- Normalized current operating earnings can be sustained indefinitely without growth or deterioration.
- Only maintenance investment is required and growth spending can be separated reliably.
- Cyclicality, one-offs, taxes, accounting depreciation and the cost of capital can be normalized appropriately.
Advantages
- Avoids distant growth and terminal-value forecasts.
- Uses current operating evidence and explicit normalization adjustments.
- Separates the value of proven operations from speculative growth value.
Limitations
- Normalized earnings are judgment-heavy for cyclical, acquisitive or restructuring companies.
- The perpetuity result is sensitive to the selected cost of capital and assumes durable economics.
- A zero-growth premise can understate valuable reinvestment, optionality and immature businesses.
How Template v9 applies it
Normalize operating results
Five-year blended margins are applied to anchor-year revenue to produce normalized income statement values.
Adjust earnings power
The model adds 20% of D&A, SG&A and R&D, then deducts maintenance capex based on 25% of average five-year capex.
Capitalize and add net cash
Adjusted earnings are divided by the cost of capital, net cash is added and the result is divided by diluted shares.
Output: An Earnings Power equity value, value per share and shared-M.O.S. buy-under price.
Key inputs
Sources and further reading
Theory here; the company-specific numbers remain under Valuation Methods.
View live calculationWhat it measures
This method separates the value attributed to distributed earnings from the value attributed to retained equity.
Origin and attribution
This model is based on Roger Montgomery’s Value.able framework, first published in 2010. It relates equity per share, return on equity, retained earnings and an investor’s required return. Its specific multiplier tables are book-specific rather than a universal academic valuation standard.
Key assumptions
- Book equity is positive, economically meaningful and measured consistently.
- Normalized ROE is sustainable and is not temporarily inflated by leverage, buybacks or unusual earnings.
- Dividend payout, retention and the required-return multiplier reasonably represent future capital allocation and risk.
Advantages
- Makes the relationship between ROE, retained earnings and shareholder value explicit.
- Anchors the estimate to reported equity and earnings rather than a distant cash-flow forecast.
- Produces a compact calculation that is easy to inspect and stress-test.
Limitations
- The method is unusable or weak when equity is negative or distorted by intangibles and accounting policy.
- The result is highly sensitive to sustainable ROE, payout and the required-return multiplier.
- A compact multiplier can overvalue temporary profitability and overlook changing leverage or competitive conditions.
How Template v9 applies it
Calculate per-share fundamentals
Equity per share, EPS, return on equity and the dividend payout ratio are calculated from the anchor year.
Calculate both multipliers
The income multiplier is ROE × required return × 100; the growth multiplier is that same base raised to 1.8.
Combine both value components
Dividend valuation and retained-equity valuation are added to produce intrinsic value per share.
Output: An intrinsic value per share and shared-M.O.S. buy-under price, or N/A when the model guard applies.
The exact model returns N/A for non-positive equity, ROE above 100%, invalid required inputs or a negative multiplier base. Available method values are included in both the dashboard average and median.
Key inputs
Sources and further reading
Theory here; the company-specific numbers remain under Valuation Methods.
View live calculationHow the platform works
Three input routes, one calculation engine
U.S. stocks — automatic
Search a ticker. For most U.S. companies that report to the SEC, five fiscal years are loaded automatically in USD.
Listed companies — manual
Upload a PDF or Excel file, or enter five years of published figures in the company’s reporting currency.
Own or local company — manual
Upload or enter internal statements for a private or local business and select one of 50 currencies.
Complete five years
Review imported data or enter the annual financial statements yourself.
Run Template v9
Statements, ratios, quality, warnings and valuations update from the same inputs.
Inspect every step
Use Annual Results, Ratio’s, Charts and the live method pages to verify the calculation.