How We Value a Stock
Every Zumedha report starts from the same inputs and cross-checks several valuation methods, because no single method suits every business. Here is what we examine, which data we use and how we turn the results into valuation bands. We show the inputs, not the working, so you know what drives each number.
Education and information only. Not investment advice.
Our five-step valuation process
The same sequence for every Indian listed company we cover.
Gather
Filings, results and management commentary
Normalise
Clean one-offs so numbers are comparable
Choose methods
Match methods to the business model
Cross-check
Test results under bear, base and bull cases
Set bands
Publish valuation bands with risks and catalysts
Stock valuation methods and the inputs we use
Five methods, each with its own set of inputs. The mix changes with the business.
Discounted Cash Flow (DCF)
Best for: businesses with predictable cash generation
Inputs we use
- Revenue growth by year
- Operating margin trend
- Tax rate
- Capex and depreciation
- Working capital needs
- Risk-free rate (10-year G-Sec yield)
- Equity risk premium
- Beta
- Cost of debt
- Debt and equity mix
- Long-term growth rate
- Net debt and cash
- Shares outstanding
Relative valuation
Best for: comparing a company with listed peers
Inputs we use
- Peer set by business model
- Price to earnings
- EV to EBITDA
- Price to book
- EV to sales
- PEG ratio
- Sector median and range
- The company’s own past multiples
- Growth and return gap versus peers
Net Asset Value (NAV)
Best for: asset-heavy, holding and property-linked businesses
Inputs we use
- Book value of assets
- Revalued land and property
- Listed investments at market price
- Unlisted stakes at fair value
- Total debt and liabilities
- Holding-company discount
Earnings Power Value (EPV)
Best for: mature earners, as a no-growth reality check
Inputs we use
- Normalised operating profit
- Through-the-cycle margin
- Tax rate
- Maintenance capex
- Cost of capital
- Net debt and cash
Sum-of-the-Parts (SOTP)
Best for: diversified groups with distinct businesses
Inputs we use
- Segment revenue and EBITDA
- Segment-wise multiples
- Segment growth and risk
- Listed subsidiaries at market value
- Holding-company discount
- Net debt and minority interests
Scenarios and valuation bands
We test each valuation under three cases. What changes between them: growth, margins, the multiple applied and the discount rate.
Bear case
Slower growth, thinner margins, lower multiples, higher risk.
Base case
Our most likely path, anchored to filings and management guidance.
Bull case
Faster growth, margin expansion, richer multiples, lower risk.
How a valuation band reads
Each company’s band is set from its own base case and scenario range, and is compared with the market price on the report date.
Data, special cases and quality checks
Where the data comes from
- Annual reports
- Quarterly results
- NSE and BSE filings
- Investor presentations
- Earnings call transcripts
- Shareholding patterns
- Peer company filings
- RBI and industry data
- Market prices on the report date
Banks, NBFCs and insurers
Financial companies are not valued on free cash flow. We use inputs built for leveraged balance sheets.
- Book value per share
- Return on equity and assets
- Net interest margin
- Gross and net NPA
- Capital adequacy
- Credit cost
- Loan or AUM growth
- Cost to income
- Cost of equity
Quality and risk checks
- Promoter holding and pledging
- Return on capital
- Debt and interest cover
- Cash conversion
- Related-party dealings
- Auditor remarks
- Customer or product concentration
- Regulatory and policy risk
- Management track record
Stock valuation questions
Which valuation method is the most accurate?
None on its own. Each method answers a different question, so we cross-check several and explain where they agree or differ.
Why do you not show the formulas?
This page lists the inputs and data so you can see what drives a valuation. Each report states its key assumptions so you can test them against your own view.
Where do the numbers come from?
Company filings, results, investor presentations, earnings calls and exchange data, with market prices taken on the report date.
Is this investment advice?
No. Valuation bands are analytical estimates published for education and information. Read our Disclaimer and consult a registered adviser before investing.