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SnapFi

Equities

33 formulas

Equity formulas value individual stocks using price-to-earnings (P/E) ratios, expected earnings growth, required returns, and a margin of safety. They answer questions like "what entry P/E justifies my target return?", "what is the most I should pay for this stock today?", and "what IRR will I realize at exit?" — the building blocks of fundamentals-driven equity investing.

P/E & Earnings

Entry P/E Ratio

Calculates the maximum P/E ratio to pay today so that compounding earnings growth, sold at an assumed exit P/E, delivers the required rate of return — with an optional margin of safety discount.

EntryPE=ExitPE×(1+g)n(1+r)n×(1−MOS)\text{EntryPE} = \text{ExitPE} \times \frac{(1 + g)^n}{(1 + r)^n} \times (1 - \text{MOS})

Showing without dividends

2 formula options

Maximum Stock Price

Calculates the maximum price per share to pay today by projecting current EPS forward at the growth rate, applying the exit P/E, and discounting back at the required return — with an optional margin of safety discount.

P0=E0(1+g)n×ExitPE(1+r)n×(1−MOS)P_0 = \frac{E_0 (1+g)^n \times \text{ExitPE}}{(1+r)^n} \times (1 - \text{MOS})

Showing without dividends

2 formula options

Projected EPS from Revenue

Builds future earnings per share from the top down: compound revenue forward at a growth rate, apply an expected net profit margin to get net income, then divide by a share count that shrinks with buybacks or expands with dilution.

EPSn=Rev0(1+grev)n×NetMarginShares(1+s)n\text{EPS}_n = \frac{\text{Rev}_0(1+g_{\text{rev}})^n \times \text{NetMargin}}{\text{Shares}(1+s)^n}

Fair Buy Price (Revenue Projection)

Full top-down stock valuation: project revenue, margin, and share count forward to a year-n EPS, apply an exit P/E to get a future share price, discount that price back at your required return, and optionally cut it by a margin of safety.

Pbuy=Rev0(1+grev)n×NetMargin×ExitPEShares(1+s)n(1+r)n×(1−MOS)P_{\text{buy}} = \frac{\text{Rev}_0(1+g_{\text{rev}})^n \times \text{NetMargin} \times \text{ExitPE}}{\text{Shares}(1+s)^n (1+r)^n} \times (1 - \text{MOS})

Expected Annual Return (Revenue Projection)

The inverse of the fair buy price: given what the stock costs today, the annualized return implied by projected revenue, net margin, share count, and an exit P/E multiple.

ExpRet=[Rev0(1+grev)n×NetMargin×ExitPEShares(1+s)n×Pmkt]1/n−1\text{ExpRet} = \left[\frac{\text{Rev}_0(1+g_{\text{rev}})^n \times \text{NetMargin} \times \text{ExitPE}}{\text{Shares}(1+s)^n \times P_{\text{mkt}}}\right]^{1/n} - 1

Earnings Yield

Inverse of the P/E ratio: trailing or forward EPS divided by current price. Expresses earnings as a yield, directly comparable to bond yields and Treasury rates.

Earnings Yield=EPSP\text{Earnings Yield} = \frac{\text{EPS}}{P}

PEG Ratio

P/E divided by expected earnings growth rate (in percentage points). Peter Lynch's heuristic for whether a stock's P/E is justified by its growth profile: PEG ≈ 1 is fair, < 1 is cheap, > 1 is expensive.

PEG=P/EGrowth Rate (%)\text{PEG} = \frac{\text{P/E}}{\text{Growth Rate (\%)}}

Showing annual compounding

2 compounding options

Implied Growth Rate

Backs the Entry P/E formula out of the unknown growth rate: given a market P/E, exit P/E assumption, required return, and holding period, what EPS growth rate is the market pricing in?

ImpliedG=[P/E×(1+r)nExitPE]1/n−1\text{ImpliedG} = \left[ \frac{P/E \times (1 + r)^n}{\text{ExitPE}} \right]^{1/n} - 1

Implied Required Return

Inverts the Entry P/E formula to solve for the required return: given the market P/E, an exit P/E assumption, an expected growth rate, and a holding period, what return does the price imply if all assumptions are met?

ImpliedR=[(1+g)n×ExitPEP/E]1/n−1\text{ImpliedR} = \left[ \frac{(1 + g)^n \times \text{ExitPE}}{P/E} \right]^{1/n} - 1

Showing without dividends

2 formula options

Dividend Discount Models

Gordon Growth Model

Constant-growth dividend discount model: present value of an infinite stream of dividends growing at a constant rate g, discounted at required return r. The foundational dividend-based valuation formula.

V0=D1r−gV_0 = \frac{D_1}{r - g}

No-Growth DDM (Preferred Stock)

Special case of the dividend discount model with zero growth: a perpetual fixed dividend discounted at the required return. The right framework for preferred stock and any fixed-perpetuity income stream.

V0=D0rV_0 = \frac{D_0}{r}

Two-Stage DDM

Dividend discount model with two distinct growth stages: a high-growth period of n₁ years followed by a perpetual terminal-growth stage. Combines explicit-projection PV with a Gordon-style terminal value.

V0=∑t=1n1D0(1+g1)t(1+r)t+D0(1+g1)n1(1+g2)(r−g2)(1+r)n1V_0 = \sum_{t=1}^{n_1} \frac{D_0(1+g_1)^t}{(1+r)^t} + \frac{D_0(1+g_1)^{n_1}(1+g_2)}{(r-g_2)(1+r)^{n_1}}

Sustainable Growth Rate

Maximum growth rate a company can sustain without external financing: ROE multiplied by the retention ratio (1 − payout). Connects dividend policy and capital efficiency to the growth rate input every other valuation formula needs.

g=ROE×(1−Payout)g = \text{ROE} \times (1 - \text{Payout})

Multiples & Book Value

Price-to-Book (P/B)

Stock price divided by book value per share. Compares market value of equity to its accounting book value — a classic Graham-style value metric, especially useful for asset-heavy businesses.

P/B=PBVPS\text{P/B} = \frac{P}{\text{BVPS}}

Book Value per Share (BVPS)

Shareholders' equity divided by diluted shares outstanding. The accounting book value of one share — a per-share liquidation-style floor for equity value.

BVPS=EquityShares Outstanding\text{BVPS} = \frac{\text{Equity}}{\text{Shares Outstanding}}

Graham Number

Benjamin Graham's intrinsic-value heuristic for defensive investors: the geometric mean of 22.5 times trailing EPS and book value per share. Encodes Graham's belief that P/E should not exceed 15 and P/B should not exceed 1.5 simultaneously.

GrahamNum=22.5×EPS×BVPS\text{GrahamNum} = \sqrt{22.5 \times \text{EPS} \times \text{BVPS}}

EV / EBITDA

Enterprise value divided by EBITDA — a capital-structure-neutral valuation multiple. Compares the total value of the firm (equity + debt − cash) against its operating-cash-flow proxy.

EV/EBITDA=MarketCap+Debt−CashEBITDA\text{EV/EBITDA} = \frac{\text{MarketCap} + \text{Debt} - \text{Cash}}{\text{EBITDA}}

Free Cash Flow Yield

Free cash flow divided by market capitalization. The cash-yield equivalent of earnings yield — answering "what cash return does the equity throw off relative to its price?"

FCF Yield=FCFMarketCap\text{FCF Yield} = \frac{\text{FCF}}{\text{MarketCap}}

Cost of Capital

CAPM (Capital Asset Pricing Model)

Cost of equity = risk-free rate + beta × equity risk premium. The most-cited model for translating systematic risk (beta) into a required return on equity.

re=Rf+β×(Rm−Rf)r_e = R_f + \beta \times (R_m - R_f)

WACC (Weighted Average Cost of Capital)

Weighted average of the firm's after-tax cost of debt and cost of equity, weighted by their proportions in the capital structure. The discount rate that pairs with unlevered free cash flow (FCF to firm) in DCF analysis.

WACC=we×re+wd×rd×(1−t)\text{WACC} = w_e \times r_e + w_d \times r_d \times (1 - t)

Equity Risk Premium

Difference between the expected return on the equity market and the risk-free rate. The compensation investors demand for bearing equity (rather than risk-free) risk — the building block of CAPM.

ERP=Rm−Rf\text{ERP} = R_m - R_f

DCF & Total Return

Two-Stage DCF Valuation

Two-stage discounted cash flow: explicit FCF projection for n₁ years at growth rate g₁, then a Gordon-style terminal value at perpetual growth rate g₂. Discounts both stages at WACC (r) to today.

V0=∑t=1n1FCF0(1+g1)t(1+r)t+FCF0(1+g1)n1(1+g2)(r−g2)(1+r)n1V_0 = \sum_{t=1}^{n_1} \frac{\text{FCF}_0(1+g_1)^t}{(1+r)^t} + \frac{\text{FCF}_0(1+g_1)^{n_1}(1+g_2)}{(r-g_2)(1+r)^{n_1}}

Total Shareholder Return (TSR)

Annualized total return to shareholders including capital appreciation and dividends received. Computed as the geometric average return over the holding period, treating dividends as an additional terminal cash flow.

TSR=(P1+DividendsP0)1/n−1\text{TSR} = \left( \frac{P_1 + \text{Dividends}}{P_0} \right)^{1/n} - 1

Buyback Yield

Dollars spent on share repurchases divided by market capitalization. The buyback equivalent of dividend yield — measures cash returned to shareholders via repurchases rather than dividends.

Buyback Yield=Buyback SpendMarket Cap\text{Buyback Yield} = \frac{\text{Buyback Spend}}{\text{Market Cap}}

Shareholder Yield

Sum of dividend yield, buyback yield, and debt-paydown yield. The complete picture of cash returned to shareholders — a more comprehensive successor to dividend yield as a yield-style equity screen.

Shareholder Yield=DivYield+BuybackYield+DebtPaydownYield\text{Shareholder Yield} = \text{DivYield} + \text{BuybackYield} + \text{DebtPaydownYield}

Risk-Adjusted Returns

Sharpe Ratio

Excess return per unit of total volatility. Computes the mean of the return series, subtracts the risk-free rate, and divides by the sample standard deviation of returns.

Sharpe=Rp‾−Rfσp\text{Sharpe} = \frac{\overline{R_p} - R_f}{\sigma_p}

Sortino Ratio

Like Sharpe, but the denominator uses only downside deviation (volatility of returns below the risk-free rate), not total volatility. Penalizes losses but not upside swings.

Sortino=Rp‾−Rfσdown,σdown=∑Ri<Rf(Ri−Rf)2n−1\text{Sortino} = \frac{\overline{R_p} - R_f}{\sigma_{down}}, \quad \sigma_{down} = \sqrt{\frac{\sum_{R_i < R_f}(R_i - R_f)^2}{n - 1}}

Treynor Ratio

Excess return per unit of systematic (market) risk. Numerator is the same as Sharpe; denominator is beta instead of total volatility.

Treynor=Rp−Rfβp\text{Treynor} = \frac{R_p - R_f}{\beta_p}

Information Ratio

Active return per unit of tracking error. Numerator is the mean excess return over the benchmark; denominator is the standard deviation of those excess returns (the tracking error).

IR=Rp−Rb‾σ(Rp−Rb)IR = \frac{\overline{R_p - R_b}}{\sigma(R_p - R_b)}

Portfolio Variance (2-Asset)

Variance of a two-asset portfolio. Combines individual variances with the covariance term that captures diversification benefits when correlation is below 1.

σp2=w12σ12+w22σ22+2w1w2ρ12σ1σ2\sigma_p^2 = w_1^2 \sigma_1^2 + w_2^2 \sigma_2^2 + 2 w_1 w_2 \rho_{12} \sigma_1 \sigma_2

Geometric Mean Return

Compounded average periodic return. Multiplies (1 + r) across all periods, takes the n-th root, and subtracts 1. The honest "actual realized growth" of the series.

GMR=(∏t=1n(1+rt))1/n−1GMR = \left( \prod_{t=1}^{n} (1 + r_t) \right)^{1/n} - 1

Arithmetic Mean Return

Simple average of periodic returns. Sum of returns divided by the number of periods.

AMR=1n∑t=1nrtAMR = \frac{1}{n} \sum_{t=1}^{n} r_t

Coefficient of Variation (CV)

Standard deviation divided by mean — risk per unit of return. Unitless, so it compares cleanly across investments with different return scales.

CV=σR‾CV = \frac{\sigma}{\overline{R}}