Reference

Glossary

Every term used in a StockValuer valuation, in plain language.

Discounted cash flow (DCF): A discounted cash flow (DCF) estimates a company's worth from the cash it can generate for its owners over time, discounted back to today rather than judged by sentiment or a market multiple. It is the valuation method StockValuer uses — see the full guide for how the pieces fit together.
Intrinsic value: The estimated worth of a company derived from the cash it is expected to produce for its owners over time, discounted back to today. It is compared against the market price to judge whether a stock looks cheap or expensive.
Free cash flow: Operating cash flow minus the reinvestment (capital expenditure and working capital) needed to sustain and grow the business. A DCF values a company by discounting the free cash flows it is projected to generate.
Discount rate (WACC): Future cash is worth less than cash today, both because of the time value of money and because the future is uncertain. StockValuer uses a weighted average cost of capital (WACC) — a blend of the cost of equity (via CAPM) and the after-tax cost of debt — computed from researched market inputs rather than guessed.
Cost of equity: The return shareholders demand for the risk of owning the stock. StockValuer estimates it with the Capital Asset Pricing Model (CAPM): the risk-free rate plus the company's beta multiplied by the equity risk premium.
Risk-free rate: The yield on a low-risk benchmark such as long-dated government bonds. It anchors the cost of equity: every risky investment must offer more than this to be worth holding.
Beta: A measure of how sensitive a stock's returns are to the broader market. A beta above 1 implies larger swings than the market; below 1 implies smaller. It scales the equity risk premium in CAPM.
Equity risk premium: The additional return, above the risk-free rate, that investors require to hold equities rather than safe assets. Combined with beta and the risk-free rate, it produces the cost of equity.
Cost of debt: The rate a company pays to borrow. Because interest is tax-deductible, its after-tax value feeds the WACC, weighted by how much debt versus equity the company uses.
Revenue growth: The year-by-year path of projected sales growth. It is one of the most consequential judgment inputs in a DCF and is researched from primary sources, with a rationale and citations for each case.
Operating margin: Operating income divided by revenue. The target operating margin the business is expected to reach shapes how much of projected revenue converts into the profit that ultimately drives cash flow.
Tax rate: The share of operating profit paid in tax. It converts pre-tax operating profit into the after-tax figure that feeds free cash flow.
Reinvestment rate: How much of the profit is reinvested in capital and working capital to sustain growth. Higher growth generally demands higher reinvestment, which reduces near-term free cash flow.
Terminal growth rate: The steady rate at which cash flows are assumed to grow forever after the explicit forecast period. It must stay modest — no company can outgrow the economy indefinitely — so it is bounded by a guardrail.
Terminal value: A single estimate of everything the business is worth beyond the explicit forecast window, computed from the terminal growth rate and discount rate, then discounted back to today. It is often the largest component of a DCF, which is why its inputs are bounded.
Margin of safety: The gap between intrinsic value per share and the market price, expressed as a percentage. A positive margin of safety means the stock trades below the computed intrinsic value; it is a buffer against forecasting error, not a guarantee.
Bear / base / bull cases: Rather than a single point estimate, StockValuer researches three coherent scenarios: a conservative bear case, a central base case, and an optimistic bull case. Seeing the range makes the sensitivity of the valuation to its assumptions explicit.