Short guides to the ideas behind every number in this app, from P/E ratios to bankruptcy scores.
Fair value: what is one share worth?
Stock Oracle values a company the way professional analysts do: an intrinsic value from the business, checked against what the market pays, with a safety margin that grows with uncertainty.
1. Intrinsic value: the model that fits the business
Most companies: a discounted cash flow (DCF). Revenue follows analysts' forecasts for the next two years, then its growth slows to a long-run rate (at most 2.5%). Each year's free cash flow is the profit after tax minus the investment that growth needs, and is converted to today's money with the discount rate. Cash is added and debt subtracted to get the value of the shares.
Cyclical companies (oil, mining, carmakers): the same model, on their median profit margin of the last 5 years, so a boom or a bust year doesn't decide the value.
Banks and insurers: excess returns. Their equity plus the profit they earn above what shareholders require. Their cash flow mixes customers' money with their own.
Utilities and REITs: dividends. They pay out most of what they earn, so the dividends they will pay, in today's money.
The risk-free rate is the 10-year government bond of the company's currency; the market risk premium is Damodaran's estimate (4.2% in Oct 2026); beta mixes the stock's own volatility with its industry's. Debt, which costs less than equity, is blended in (WACC).
3. The fair value
Fair value = 50% intrinsic value + 25% price at its usual P/E + 25% analysts' target in today's money
4. The verdict
Price far below
Undervalued
More than the safety margin below the fair value.
In between
Fairly valued
Within the margin: no clear mispricing.
Price far above
Overvalued
More than the margin above the fair value.
The margin depends on how uncertain the estimate is (do the methods agree, how much the share price swings, how steady earnings are, how far apart analysts are): 10% for low uncertainty, 15% medium, 25% high, 35% very high. The Valuation tab of every stock shows each step with the real numbers.
PEG ratio: is the price fair for the growth?
A low P/E can still be expensive if the company barely grows, and a high P/E can be a bargain if it grows fast. The PEG ratio puts the two together.
How it's calculated
PEG = P/E ratio ÷ expected yearly earnings growth (in %)
Growth is used as a whole number: 25% growth counts as 25.
An example
Company A: fast grower
P/E 30, earnings growing 35% a year
PEG = 30 ÷ 35 = 0.86
Cheaper per unit of growth, despite the higher P/E.
Company B: slow grower
P/E 15, earnings growing 5% a year
PEG = 15 ÷ 5 = 3.00
Looks cheap, but you pay a lot for very little growth.
How to read it
Below 1
Cheap for its growth
Earnings are growing faster than the price multiple. Often a good starting point for long-term buyers.
1 to 2
Fair for its growth
Priced about right for its growth. Common for large, high-quality companies.
Above 2
Pricey for its growth
The price assumes everything goes right. A missed forecast can hit the share price hard.
Debt and short-term cash: can it pay its bills?
Strong companies can pay their bills, carry their debt comfortably and keep investing even when business slows.
Debt ÷ EBITDA under 3
Manageable
All debt could be repaid with less than three years of operating profit.
Current ratio 1 or more
Enough to cover
Short-term assets (cash, money owed by customers, stock) cover the bills due within a year.
Interest under 30% of operating cash
Light
Interest payments use only a small part of the cash the business brings in.
Good to know: a temporary dip in free cash flow is fine when it comes from investing in new factories, data centers or products, as long as sales keep growing.
Altman Z-Score: what is the risk of bankruptcy?
A formula created by Professor Edward Altman that combines five balance-sheet ratios to flag companies at risk of financial distress within about two years.
Which version is used
Manufacturers and most other companies: the original Z-Score (1.2·X1 + 1.4·X2 + 3.3·X3 + 0.6·X4 + 0.999·X5). Distress below 1.81, safe above 2.99.
Services, software, retail and utilities: Altman's Z''-Score, which leaves out sales ÷ assets (it varies too much by industry). Distress below 1.10, safe above 2.60.
Banks, insurers and real-estate trusts: not used. Their balance sheets are mostly loans and deposits, so the score would be meaningless.
Safe zone
Low risk
Little sign of financial distress.
Grey zone
Watch closely
Some risk. Keep an eye on debt and cash.
Distress zone
High risk
Statistically similar to companies that later got into serious trouble.
Piotroski F-Score: are the fundamentals getting better?
Nine simple yes/no tests, created by Professor Joseph Piotroski, that compare this year with last year. Each pass earns one point.
Profitability (4 points)
Made a profit
Generated cash from its operations
Return on assets improved
Cash from operations higher than reported profit
Debt and liquidity (3 points)
Long-term debt fell relative to assets
Short-term liquidity (current ratio) improved
No new shares issued
Efficiency (2 points)
Gross margin improved
Sales per dollar of assets improved
6 to 9
Improving
Most signals point the right way; 8–9 is excellent.
4 to 5
Mixed
Some things are getting better, others worse.
0 to 3
Weakening
The business is getting weaker on most measures.
Beneish M-Score: are the accounts trustworthy?
Eight ratios, created by Professor Messod Beneish, that tend to move together when a company is flattering its profits. It famously flagged Enron years before its collapse.
Money owed by customers growing faster than sales: sales may be booked too early.
Falling margins and more costs turned into “assets”: pressure to make results look better.
Profit not backed by cash: earnings that never turn into money in the bank.
−1.78 or lower
No red flags
The accounts look normal.
Above −1.78
Red flag
Patterns similar to companies that manipulated earnings. Worth a closer look, not proof.
Share count: is your slice of the company shrinking?
Each share is a slice of the company. When a company issues new shares (often to pay staff), every existing slice gets smaller.
A company growing sales by 15% a year gives poor returns to shareholders if it also grows its share count by 10% a year. The opposite, buying back shares, makes every remaining share own a bigger piece.
Shrinking
Buying back shares
Each share owns more of the company every year.
Up to +2% a year
Stable
Normal for most companies.
More than +2% a year
Diluting
New shares are eating into existing shareholders' returns.
Two kinds of companies
A simple way to decide how to own a stock, popularised by investor and educator Adam Khoo.
Long-term compounders (a small minority)
Businesses with a lasting competitive advantage, steady sales growth, high return on equity (above 15%) and pricing power. They can be bought during market dips and held through ups and downs.
Cyclical companies (most of the market)
Commodities, hardware, airlines and similar businesses whose profits rise and fall with the economy. Better treated as trades with clear exit rules than as long-term holdings.
VIX: how nervous is the market?
The VIX measures how big the price swings of the S&P 500 are expected to be over the next 30 days, based on options prices. It's often called the market's fear gauge.
Below 15
Calm
Investors are relaxed and prices are often high. A reasonable time to review and rebalance.
15 to 25
Normal
Regular 3–7% dips happen; steady monthly investing works well.
25 to 30
Nervous
Investors are buying protection and 10%+ corrections are common.
Above 30
Panic
Forced selling. Historically some of the best moments to buy great companies at a discount.
Fear & Greed Index: what's the mood?
A 0–100 score that combines seven market signals. Warren Buffett's advice: “Be fearful when others are greedy, and greedy when others are fearful.”
0 to 24
Extreme fear
Good companies get sold with bad ones; often a buying window.
25 to 44
Fear
Cautious mood; a reasonable time to add gradually.
45 to 55
Neutral
No strong mood either way.
56 to 75
Greed
Optimism. Protect gains and avoid chasing.
76 to 100
Extreme greed
Euphoria. Prices may be running ahead of the businesses.
The seven signals behind it
S&P 500 compared with its 125-day average (momentum)
Stocks at 52-week highs vs. lows
Volume in rising vs. falling stocks
Bearish vs. bullish options bets (put/call ratio)
Demand for risky “junk” bonds
The VIX compared with its 50-day average
Stocks vs. safe government bonds over the last 20 days
The interest rate on 10-year US government bonds is the “risk-free” return. Every other investment is compared against it.
A cash-flow (DCF) valuation discounts future profits back to today. When the 10-year yield rises, that discount rate rises too, so profits far in the future are worth less today. Fast-growing companies, whose biggest profits are years away, are hit hardest.
Value today = sum of each year's cash flow ÷ (1 + discount rate) ^ number of years
When yields rise
Borrowing gets more expensive for companies.
High-growth stocks tend to fall in value.
Cash-rich “value” companies and banks tend to hold up better.