How each stock gets valued

Stock Analyza is an independent research project. Every analysis follows the same framework, so the numbers from one company can be compared with the next.

The process

1. Route the company to its sector framework. A mortgage REIT, a chipmaker and a pipeline company are not valued with the same metrics.
2. Pick the economic metric that fits. Free cash flow for most companies, book value and distributable earnings for mortgage REITs, and other sector equivalents where standard metrics mislead.
3. Value three scenarios. A bear, base and bull case, each with explicit assumptions, using a primary and a secondary valuation method.
4. Triangulate. The methods are weighted into one Bear, Base and Bull Value, plus a probability-weighted expected value.
5. Apply a margin of safety. Riskier and harder-to-forecast businesses require a bigger discount to the Base Value. The result is the maximum buy price.
6. Run an adversarial review. The arithmetic is recomputed independently, and the strongest bull and bear counter-arguments are tested before the verdict is final.

Reading the verdict

Buy means the price is at or below the maximum buy price. Hold means the stock may be below fair value, but not by enough to cover the risk. Sell or avoid means the price already exceeds what the business is likely worth.

Each analysis also lists what would change the view: green, yellow and red signals to watch, and the thesis breakers that would invalidate it.

The scores

Business quality (0 to 100) rates moat, returns on capital, balance sheet, earnings quality, growth runway, management and governance. Valuation (0 to 100) rates the discount to fair value, downside protection and how well the methods agree. Confidence (0 to 25, with a letter grade) rates how reliable the forecast is, which drives the required margin of safety.

Free and premium

Selected analyses are free on this site. The complete set of in-depth analyses, the archive and voting on upcoming analyses are available to members on Patreon.

Disclaimer

All content on this site is provided solely for research and educational purposes. It is not personalized investment, financial, legal or tax advice, and it is not a recommendation to buy or sell any security. Valuations rely on assumptions and third-party data that may prove incorrect. Past results do not predict future returns. Investors can lose part or all of their invested capital. Do your own research and consider consulting a licensed advisor before making investment decisions.

Stock Analyza is not affiliated with any company it analyzes and does not receive compensation from them.