Stock Valuation in 30 Seconds: 3 Numbers, 8 Methods
Stock valuation has a reputation for being a black art reserved for analysts with Bloomberg terminals. The basic methods are simpler than that.
We checked: the four most common methods (P/E, PEG, P/B, P/S) need exactly three inputs you can find on Yahoo Finance in under a minute. The toolbox runs all four in parallel and progressively unlocks four more as you add data.
The 30-second version
Pick any stock. Look up:
| Number | Where to find it |
|---|---|
| Stock price | Front page of any finance site |
| EPS (earnings per share, trailing 12 months) | “Key Statistics” tab on Yahoo/Google Finance |
| Book value per share | Same tab |
Three numbers. Now you can run:
- P/E = price / EPS
- P/B = price / book value per share
- Graham Intrinsic Value ≈ EPS × (8.5 + 2 × growth rate); only works if you also pull growth
Add annual earnings growth rate (analyst estimate, also on the same page) and you unlock PEG and Graham.
Add revenue per share (revenue / share count) and P/S works too.
Add dividend per share and the dividend discount model (DDM) becomes available for stable dividend payers.
You’re now running 6+ methods on data that took 60 seconds to find.
What each method actually tells you
| Method | What it answers | Best for |
|---|---|---|
| P/E | ”Am I paying more or less per dollar of profit than peers?” | Established profitable companies |
| PEG | ”Is the P/E justified by the growth rate?” | Growth companies |
| P/B | ”Am I paying above or below liquidation value?” | Banks, REITs, asset-heavy businesses |
| P/S | ”How many years of revenue does the price represent?” | Unprofitable growth (early-stage tech) |
| DDM | ”What’s the present value of all future dividends?” | Utilities, consumer staples, REITs |
| FCF Yield | ”What’s the free cash flow return on market cap?” | Mature businesses with reliable cash flow |
| Graham | ”What does Benjamin Graham’s 1960s formula say it’s worth?” | Sanity check on any stock |
| EV/EBITDA | ”What’s the enterprise value relative to operational profit?” | Cross-border comparisons, capital-intensive industries |
No single method covers every situation. Banks make P/E look weird because earnings are volatile and book value is core. Software companies make P/B look weird because their assets are intangible. Tesla circa 2018 made every method look weird because it had no profits.
The trick is running multiple methods on the same stock and looking at where they agree and disagree.
A worked example
Let’s run a real one. We’ll use generic placeholder numbers — for a hypothetical mid-cap industrial company:
- Price: $80
- EPS: $5
- Book value/share: $30
- Revenue/share: $50
- Earnings growth (next 5 years estimate): 8%
- Free cash flow/share: $4
- Dividend/share: $1.50
| Method | Calculation | Result | Read |
|---|---|---|---|
| P/E | 80 / 5 | 16 | Reasonable; S&P avg is ~22 |
| P/B | 80 / 30 | 2.67 | Above 1× book; expected for a healthy business |
| P/S | 80 / 50 | 1.6 | Modest; comfortable for industrials |
| PEG | 16 / 8 | 2.0 | High; you’re paying ahead of growth |
| Graham | 5 × (8.5 + 2×8) | $122.50 | Suggests undervalued by ~35% |
| FCF Yield | 4 / 80 | 5% | Solid; above bond yields |
| DDM (k=10%, g=4%) | 1.5 / (0.10−0.04) | $25 | Below current price (only meaningful if dividend is the whole thesis) |
The methods disagree. Graham screams “buy”; PEG says “overpaying for growth”; DDM says “way too expensive if you only care about dividends.” This disagreement is the point. The stock looks like a value play if you trust earnings/book; it looks expensive if you focus on growth-adjusted multiples; it’s not a dividend stock at all.
The investment decision becomes: which lens matches your investment thesis?
Cheap vs undervalued
The two terms get conflated. They aren’t the same.
- Cheap is comparative. P/E 12 in an industry where peers trade at P/E 18 → cheap.
- Undervalued is absolute. The intrinsic value formula (Graham, DCF, DDM) says the stock is worth $100 and it’s trading at $80 → undervalued.
A cheap stock can be appropriately priced if its growth or risk profile is worse than peers. A richly priced stock can be undervalued if its growth or quality is exceptional.
Useful question: is the price low because the market is wrong (opportunity), or because the business actually deserves the discount (value trap)?
Limitations every method has
- P/E ignores debt. Two companies with the same P/E and very different leverage are not equivalent investments.
- P/B ignores intangibles. Software, brand, network effects rarely show up on the balance sheet.
- DCF is only as good as the assumptions. Garbage growth rate in, garbage valuation out.
- None of them predict short-term price movement. Valuation tells you where fair value is, not when the stock will reach it. Markets stay irrational longer than most investors stay solvent.
What this article assumes
- You have access to basic financial data. Yahoo, Google Finance, or any brokerage app provides everything you need for the simple methods.
- You’re investing for years, not days. Valuation is a multi-year compass. Day-trading uses different tools entirely.
- The financial statements are honest. Accounting fraud (Enron, Wirecard) makes any valuation method useless because the inputs are wrong. Cross-checking with FCF Yield helps because cash is harder to fake than earnings.
What to actually do
- Pick a stock you’re considering.
- Look up price + EPS + book value (60 seconds).
- Run P/E and P/B in your head.
- Compare to industry peers.
- If interested enough to dig deeper, add growth + revenue + dividend and run the calculator with all 8 methods.
- Pay attention to disagreement between methods. That’s where the questions live.
Open the Stock Valuation Toolbox → and start with whatever data you have. The toolbox progressively unlocks methods as you add inputs — no need to fill in everything at once.