Fairy Dust
To keep it simple, fair value or intrinsic value for a stock can be measured by calculating earnings with a reasonable long term growth rate.
Some tech stocks are currently enjoying extraordinary growth rates averaging around 40%. Some are even higher.
Tesla has an earnings growth rate for the current year of 99.6% and the PE ratio is 684.15 at the current price.
Fair value for the stock price on earth is currently $42.02 (or 136 DOGE)
Let's take a look at these popular names using the formula below:
[AAPL, ADBE, AMZN, FB, GOOGL, MSFT, SHOP, SQ, ZM, TTD, NVDA, PYPL]
Fair Value formula:
EPS = earnings per share
8.5 = time in years
G = long term growth rate
FV = EPS X (8.5 + 2G)
Then you adjust for corporate bond yields, the alternative, "safe" investment
Currently we could say they at around 4% yield
Final Value = FV * (4.4 / 0.04)
Below is a list of popular stocks with the current Fair Value assuming they can keep a long term earnings growth rate of 15% annually, which is still an impressive number compared to most companies. Long term it is virtually guaranteed that earnings will decline from current levels so it will be interesting to see this play out in the stock price.
In addition, included below is a chart of where fair value is and text of the current growth rate this year and the P/E ratio.
Data pulled from Yahoo Finance and TD Ameritrade API
Apple
Growth rate: 57.6%
PE ratio: 31.40
Adobe
Growth rate: 21.4%
PE ratio: 51.26
Amazon
Growth rate: 33.5%
PE ratio: 66.81
Facebook
Growth rate: 30%
PE ratio: 30.38
Google
Growth rate: 49%
PE ratio: 31.68
Microsoft
Growth rate: 34.9%
PE ratio: 37.78
Shopify
Growth rate: 11.8%
PE ratio: 114.8
Square
Growth rate: 78.6%
PE ratio: 395.75
Zoom
Growth rate: 40.1%
PE ratio: 134.18
The Trade Desk
Growth rate: -10.10%
PE ratio: 157.6
Nvidia
Growth rate: 58.3%
PE ratio: 97.12
PayPal
Growth rate: 21.9%
PE ratio: 66.13
Using this method the only growth stocks that have realistic upside are Apple, Facebook, Google and Microsoft.
Some tech stocks are currently enjoying extraordinary growth rates averaging around 40%. Some are even higher.
Tesla has an earnings growth rate for the current year of 99.6% and the PE ratio is 684.15 at the current price.
Fair value for the stock price on earth is currently $42.02 (or 136 DOGE)
Let's take a look at these popular names using the formula below:
[AAPL, ADBE, AMZN, FB, GOOGL, MSFT, SHOP, SQ, ZM, TTD, NVDA, PYPL]
Fair Value formula:
EPS = earnings per share
8.5 = time in years
G = long term growth rate
FV = EPS X (8.5 + 2G)
Then you adjust for corporate bond yields, the alternative, "safe" investment
Currently we could say they at around 4% yield
Final Value = FV * (4.4 / 0.04)
Below is a list of popular stocks with the current Fair Value assuming they can keep a long term earnings growth rate of 15% annually, which is still an impressive number compared to most companies. Long term it is virtually guaranteed that earnings will decline from current levels so it will be interesting to see this play out in the stock price.
In addition, included below is a chart of where fair value is and text of the current growth rate this year and the P/E ratio.
Data pulled from Yahoo Finance and TD Ameritrade API
Apple
Growth rate: 57.6%
PE ratio: 31.40
Adobe
Growth rate: 21.4%
PE ratio: 51.26
Amazon
Growth rate: 33.5%
PE ratio: 66.81
Growth rate: 30%
PE ratio: 30.38
Growth rate: 49%
PE ratio: 31.68
Microsoft
Growth rate: 34.9%
PE ratio: 37.78
Shopify
Growth rate: 11.8%
PE ratio: 114.8
Square
Growth rate: 78.6%
PE ratio: 395.75
Zoom
Growth rate: 40.1%
PE ratio: 134.18
The Trade Desk
Growth rate: -10.10%
PE ratio: 157.6
Nvidia
Growth rate: 58.3%
PE ratio: 97.12
PayPal
Growth rate: 21.9%
PE ratio: 66.13
Using this method the only growth stocks that have realistic upside are Apple, Facebook, Google and Microsoft.
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