Valuation Method

At INTRIVAL, we aim to provide transparent, reliable intrinsic valuations for public companies using a data-driven, fundamentals-based approach. Our methodology combines proven financial models with pragmatic adjustments to handle a wide variety of companies, ranging from stable blue chips to high-growth speculative stocks.

How We Calculate Fair Value

1. Smoothed Growth Rate from Core Metrics

We start by analyzing four key per-share growth metrics over the last five years:

Book Value Per Share
Earnings Per Share
Sales Per Share
Operating Cash Flow Per Share

To reduce the impact of outliers, we calculate a smoothed average growth rate by removing the highest and lowest growth rates and averaging the remaining two:

Smoothed Growth Rate = (Sum of 4 metrics – Max – Min)/2

This stable growth rate is then used to forecast future earnings.

2. Forecasting Future Earnings

Using the smoothed growth rate, we project the company’s EPS for the next 6 years. These earnings forecasts serve as the foundation for our intrinsic valuation.

3. Discount Rate: Conservative by Design

We discount future earnings using the higher of:

The company’s Cost of Equity (calculated via CAPM)
The 10-year average annual return of the S&P 500, in the respective currency of the Index

This conservative discount rate ensures our valuations account for market risk and opportunity cost.

4. Terminal Value: Reflecting Long-Term Growth

After the 6-year forecast, we calculate a terminal value using a long-term growth rate based on the smoothed growth rate:

Smoothed Growth Rate Terminal Growth Rate Applied

≤ 12% 1%

≤ 18% 2%

≤ 24% 3%

> 24% 4%

This prevents overly optimistic perpetual growth assumptions.

5. Calculating Fair Value and Margin of Safety

We sum the present values of forecasted earnings and terminal value to estimate the fair value per share.

To help investors manage risk, we apply a Margin of Safety (MoS) — a discount off the fair value tailored to the company’s growth profile:

Growth Rate Margin of Safety Applied

≤ 12% 20%

> 12% and ≤ 18% 30%

> 18% and ≤ 24% 35%

> 24% and ≤ 30% 40%

> 30% 40%

The MoS defines a Buy Price, a conservative entry point with a built-in buffer against uncertainty.

6. Valuation for Banks and Insurance Companies

For banks and insurance companies, the fair value row in our dashboards will simply display the Book Value (BV) Per share for the given company. The BV per share is calculated by the following formula:

Shareholders Equity/Shares Outstanding

The BV method is widely used by professionals in order to gauge whether a financial institution is over or undervalued. As such, we provide the Book Value per share and compare it with the current market price in order to display a valuation percentage for the company. If a user wishes to conduct further analysis, they can utilize the TTM EPS, Cost of Equity, or Growth Rate figures also displayed on the dashboard in order to additionally value a given bank or insurance company beyond our given BV per share benchmark.

7. Valuation for FTSE 100 Investment Trusts/Closed-End Funds

For certain UK registered Investment Trusts and Closed-End Funds, our valuation methodology relies on Tangible Net Asset Value (TNAV) per share as a principal benchmark. Investment trusts differ from operating companies because they are funds—their main purpose is to hold portfolios of assets rather than to generate operating profits. The formula for this metric is as follows:

(Total Assets - Intangible Assets - Total Liabilities)/Shares Outstanding

8. Special Valuation for Negative Earnings & Speculative Companies

For companies with negative trailing EPS or exceptionally high growth rates (typically > 99%), our standard model can produce unreliable or negative fair values.

In these cases, we switch to a speculative valuation method based on historical stock price performance:

1. Calculate the company’s 5-year average annual price growth rate.

2. Project the stock price 5 years into the future using this growth rate

Projected Price = Last Close × (1 + 5Y Average Price Change)^5

3. Discount this projected price back to present using our discount rate:

Fair Value = Projected Price/(1 + Discount Rate)^5

This approach leverages market expectations while maintaining a conservative discounting framework.

Companies valued this way are clearly tagged on our platform as “P Change” for full transparency.

9. Understanding the “Metric” Tag on Our Dashboard

To keep things transparent, every company valuation on our dashboard includes a “Metric” tag indicating which method was used:

Metric Tag Meaning

EPS Valuation based on forecasted Earnings Per Share (intrinsic model)

BV Per Share Valuation based on Book Value compared with current price (model for banks and insurance companies)

TNAV Per Share Valuation based on the Tangible Net Assets compared with current price (model for UK based Investment Trusts/Closed-End Funds)

P. Change Valuation based on 5-year historical price change (speculative model)

This helps users quickly understand the valuation approach behind each company.