How to calculate the fair value of a stock
Two ways to put a number on what a business is worth, its industry's multiple and its own history, side by side, plus a cash-flow value that declines to guess when the inputs cannot carry one.
Last updated October 12, 2026
Every company page puts two fair values next to the price on its valuation chart. One asks what the company would be worth on its industry's typical multiple. The other asks what it would be worth on the multiple it has earned itself over the years. For most businesses the multiple is price to earnings. For fast growers whose earnings do not yet tell the story, it is price to sales. The line above the chart names the one in use.
In the screener we also publish how far the price sits from a cash-flow value worked out from the company's own filings. It declines to give a number for banks, insurers, lenders and property trusts, for companies whose free cash flow is negative, and where the inputs are too thin to carry one. A dash means we declined rather than guessed.
The two chart lines are a separate lens from the value score, which judges the price against the growth behind it.
One company, two yardsticks
On 9 October 2026 Garmin closed at $268.36, about 31 times its 2025 earnings of $8.59 a share. The median company in its industry (hardware, equipment and parts, 15 companies) traded at 44 times earnings that day. Garmin's own average multiple over its reported years sits well below 31.
So the two lines on Garmin's chart disagree, and that is the useful part. On the industry's yardstick the price looks modest. On Garmin's own history it looks rich. Neither is the answer. The chart puts both next to the price so you can decide which yardstick fits this business today.
Why two yardsticks, not one
Think of pricing a house. You can ask what the neighbours' houses sold for, or what this house has fetched over the years. When the street has been re-priced, the two answers drift apart, and the gap tells you something neither number does on its own. Companies work the same way: an industry can be re-rated as a whole, and a company can outgrow its own history.
On the page
Every one of these is visible to you
- The two fair-value lines and the multiple behind each
- The cash-flow value and its gap to the price, in the screener
Kept internal
Named, so you know what you are not seeing
- How the business type picks the multiple
- The thresholds that decide a company cannot be valued
Common questions
Why show two fair values instead of one?
Because each yardstick has a blind spot. The industry's multiple misses a company that is better or worse than its neighbours; the company's own history misses an industry that has been re-priced. Side by side, their disagreement is information rather than a problem to average away.
Why does a company sometimes have no fair value at all?
Because the honest answer is sometimes that there is not enough to work with. Banks, businesses with negative cash flow and companies whose inputs are too thin do not get a number invented for them; the screener shows a dash instead.
Is fair value a price target?
No. It is an estimate of what a business is worth on the assumptions shown, published so you can disagree with the assumptions. Nothing on Returnolio is a recommendation to buy or sell.
Fair value is a range, not one number: the industry's price and the company's own history side by side, and a cash-flow value that declines when the inputs cannot carry one.
Educational and proprietary. This explains what our research does, not the exact formula behind it, and it is not personalised investment advice. See the full disclaimer.
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