Is This Stock Undervalued? Free Stock Price Checker

What this checker does

A stock is "undervalued" when its price is lower than what the business is worth. The hard part is knowing what it's worth. Every answer depends on a guess about the future.

So this checker turns the question around. It doesn't guess what the business is worth. It works out what today's price already assumes about the future. Then it puts that next to what the company has actually done.

Type a ticker and you see:

• Our verdict first. The same verdict as the company's page on our site, with its quality and price scores.
• What the price assumes. How fast the company's spare cash must grow each year for the next 10 years to be worth today's price.
• What it has done. How fast its sales grew over the last 5 years.
• What the estimate starts from. Its spare cash and its debt, in plain words.

It is free and you don't need an account. It uses the numbers companies file with the SEC, the US regulator for stocks. We read them every night.

How it works

A business is worth the cash it will hand its owners over time. This checker uses that idea backwards.

1. Spare cash. We start from the company's free cash flow: the cash that came in, minus what it spent to keep running and to grow. We use the last 12 months, or its last full year when that's what we have.
2. Money later is worth less than money now. A dollar in ten years is worth less than a dollar today. We count each future dollar at 10% a year less for each year it is away.
3. After 10 years. We assume the cash then grows 2.5% a year, about the pace of inflation.
4. Debt and cash. A buyer of the whole company takes on its debt and gets its cash. So we add the debt to the price and take off the cash.
5. The answer. We find the yearly growth over the next 10 years that makes all that future cash worth exactly today's price.

This is called a reverse discounted cash flow, or reverse DCF. It is the same math as the reverse DCF in our free DCF calculator.

How to read the result

Start with the verdict. It tells you how the company did on our two nightly checks: a good business, and a fair price.

Then read the two growth lines together:

• "Today's price assumes … grows about 8% a year." That is the growth the price needs.
• "Over the past 5 years its sales grew about 6% a year." That is what the company has done.

When the first number is far above the second, the price needs the company to do better than it has. When it is below, the price needs less than the company has managed. Neither tells you what will happen. Sales are not the same as spare cash, and the past doesn't repeat on its own.

Two special lines:

• "Grows more than 50% a year." The price needs growth beyond anything we work out. Young, fast-growing companies often land here.
• "Shrinks by more than 5% a year." The price would still be covered if the cash shrank faster than that.

A worked example

Here is a made-up company, with round numbers.

• It made $500 million of spare cash in the last 12 months.
• It owes $500 million more than it holds in cash.
• It has 100 million shares, and each one costs $100. So the whole company costs $10 billion, plus the $500 million of debt.
• Its sales grew 6% a year over the last 5 years.

Which growth makes $500 million a year worth $10.5 billion today? About 8.4% a year for 10 years. So the checker says:

"Today's price assumes the company's spare cash (free cash flow) grows about 8.4% a year for the next 10 years. Over the past 5 years its sales grew about 6% a year."

If the share price were $60 instead, the price would only assume about 1.8% a year.

When there is no answer

Some companies don't fit this method. The checker tells you why in one sentence. It never makes up a number.

• Banks and insurers. Their cash moves through loans and claims. Free cash flow doesn't mean the same thing for them.
• Companies that burn cash. If a company made no spare cash lately, there is nothing to grow. Young and struggling companies often land here.
• Missing numbers. If we couldn't read its cash flow, price, debt or cash, we say so.
• Cash above the price. If the whole company costs less than the cash it holds after paying its debts, the price doesn't rely on any growth at all.

What the checker can't tell you

• It is a simple estimate. Small changes in the starting cash or the 10% move the answer. Try other numbers in the DCF calculator.
• It starts from one year of cash. A year that was unusually good or bad can push the answer up or down.
• It can't see the future. A new product, a lawsuit or a new boss can change everything.
• It never says what to do. It shows what the price assumes. This is not advice.

Questions

Is it really free? Yes. There's no account and no limit, apart from a cap on checks per minute to stop robots.

Which stocks does it cover? US-listed companies that file reports with the SEC. We read them every night.

Why sales growth, and not cash growth? Sales move more smoothly than spare cash, so five years of sales give a steadier picture of how fast a company has grown.

Why 10% a year? It is a common yardstick for the yearly return people ask of a stock. Our DCF calculator lets you try another.

Can I change the numbers? Yes. Click "Try your own numbers" to open the same company in our DCF calculator. It starts from the checker's spare cash and the company's past sales growth. The calculator reads shares and debt live, so its answer can differ slightly.

What does "our verdict" mean? Every night we check about 3,000 US companies for two things: a good business, and a fair price. The verdict tells you how this company did. See today's list of undervalued stocks for the ones that passed both.

The next step

Knowing what the price assumes is one part of the answer. Before you go further, check the rest. Look for warning signs in its filings with the free red flag scanner. Read the full company page for its quality checks and five years of numbers. For a deeper answer, ask for the deep dive on any stock page.