Is the price reasonable? The method
Method last changed: 2026-10-29
What this is
Every company page answers "Is the price reasonable?" in two parts. The first compares today's price multiples with the company's own past fiscal years. The second is a reverse discounted-cash-flow model: instead of guessing a future and computing a value, it takes today's price and asks what free-cash-flow growth that price assumes, then sets it beside the growth the company actually delivered.
This is a simple model with fixed assumptions (9% discount rate, 2.5% growth after year ten). It shows what the price assumes; it is not a price target. No value per share is computed anywhere on the site.
Part A: today against its own past
P/E, price-to-sales (P/S) and price-to-free-cash-flow (P/FCF) are computed at each of the last up to 10 fiscal year ends: the split-adjusted closing price on the year-end date, over that fiscal year's diluted earnings per share, revenue and free cash flow (operating cash flow minus capital spending) from the annual SEC filing. Per-share figures are re-based for any stock split after the filing, so every year is on today's share basis.
A multiple is shown only with at least 5 usable fiscal years. A year with a loss or negative free cash flow is marked "n/m" and left out of the low, median and high. Today's P/E is the trailing P/E shown on the page; today's P/S and P/FCF use the current market cap over trailing revenue and trailing free cash flow.
Part B: what the price assumes
Enterprise value is our dated market cap plus net debt from the latest balance sheet (total borrowings minus cash and short-term investments). Free cash flow is the last four quarters of operating cash flow minus capital spending, or the latest fiscal year when four consecutive quarters are not held.
The model grows that free cash flow at a constant rate g for 10 years, adds a terminal value growing 2.5% a year after year 10, discounts everything at 9% a year, and solves for the g that makes the total equal enterprise value (bisection between -20% and 60%, to 0.01%). Outside that range the page says the price implies growth beyond what this simple model can read.
Delivered growth is the compound annual growth of fiscal-year free cash flow over the last five and three years, from the filings, shown only when both ends of a span are positive.
When the reverse DCF is not shown
Banks, insurers and other financial companies are not read this way: free cash flow does not describe their business.
Real estate companies are not read this way: their cash generation is measured by funds from operations, not free cash flow.
Free cash flow is negative, so the price cannot be read this way.
Free cash flow is under 0.5% of enterprise value, too small a base for this model to read.
We do not hold a dated enterprise value for it (market cap plus net debt), so the price cannot be read this way.
We do not hold its free cash flow, so the price cannot be read this way.
UK companies are not read this way yet.
The free-cash-flow floor is 0.5% of enterprise value.
Worked example
Apple Inc. (AAPL), as of 2026-10-29: enterprise value $5114.0B, free cash flow $136.7B (trailing twelve months). Solving the model gives g = 13.9% a year.
At today's price the market is assuming free cash flow grows about 14% a year for ten years. Over the last three years free cash flow shrank 4% a year.
P/E is 40 today. Over its last 5 fiscal years it ranged 25 to 37, median 28. (today 40.0.)