Fair value
Our valuation process emphasizes the use of historical Price-to-Earnings (P/E) values. By evaluating historical P/E ratios, we place a company's current financial metrics within a broader historical context.
What is fair relative value?
To calculate fair value, we analyze the five-year historical dynamics of P/E ratio and find the median mean. Knowing the earnings per share for the last 12 months, we multiply this value by the median of the historical P/E and get a value that we use as fair value.
fair value
=Median P/E ratio
×EPS (last 12 months)
When the company is undervalued?
If the market price of a stock is below its fair value, the stock is undervalued. The greater the difference between prices, the more undervalued the company is and the greater its growth potential (upside).
What is overvalutaion?
Сonversely, if the stock price is trading above fair value, the company is overvalued.