Introduction

The purpose of the valuation model is to illustrate one of the tools we use for assessing the value of common stocks for consideration in all of our managed accounts, including the Diamond Hill Funds. To learn more about the underlying philosophy that supports this model,  see Philosophy. To learn about the underlying mathematics, see Model Introduction.  Both of these links are also available from the navigation menu on the right-hand side of the main interactive valuator page.

The valuator provides a framework for evaluating the intrinsic value of a common stock. The intrinsic value of a stock is the present value of all the future cash flows. Using a five-year time horizon, the cash flows consist of any dividends paid and the proceeds of a sale of the stock at the end of year five. The key factors in determining the value are the current stock price, the current dividend and earnings, the growth rate of the dividend and earnings, the terminal P/E, and the required rate of return used to discount the cash flows to their present value. We believe if these factors are estimated with reasonable accuracy, the model provides a valuable tool in assessing the intrinsic value and the expected return for a given stock.  Hence the results of this model are only as good as the input variables used to derive the intrinsic value.

How To Use The Model

To get started, enter the ticker symbol for a company you'd like to evaluate (for example, GE for General Electric)  into the Ticker input box and click the Retrieve button.

If there is a stock corresponding to this ticker in our database (a universe of approximately 4400 stocks and is updated daily for market and fundamental data), current data (company name, market closing price, dividend and tangible book value per share) will be displayed for this stock along with the first approximation of the fundamental variables.  The Default valuation will use these values to compute what we call a “first approximation” of the estimated intrinsic value for the stock. , as well as the Estimated Earnings per share Year 5,  Estimated Dividends per share Year 5, Estimated Tangible Book Value per share Year 5, 5 Year Price Target and the Estimated 5 Year Annual Return. Please see  Dictionary, also available from the navigation menu, for an explanation of these terms.

Implied Growth Rate, Implied Required Return and Implied Terminal Adjusted P/E  are also calculated as expected by the current market price holding other variables constant.

The Custom table allows you to change the Fundamental Variables and calculate the result. 

You may press the Clear button at any time to clear columns of the Valuator and start over.

This model is just a tool to value common stocks and the output is completely dependent on the inputs. The output of the model does not in any way constitute a investment recommendation of any sort and Diamond Hill will not be liable for any action I may take based on the results of the model. I have read the model introduction and understand the key factors and limitations associated with the use of the model.