Intrinsic Value Calculator
Valuation toolkit for Pakistan Stock Exchange ā Graham Number, DCF, P/E Relative, and DDM. All values in PKR.
š Graham Number Inputs
Formula
Worked Example
Hypothetical company: EPS = Rs. 28.3, BVPS = Rs. 98.15. Graham Number = ā(22.5 Ć 28.3 Ć 98.15) = Rs. 249.99. At a price of Rs. 210, the stock trades 16.0% below its Graham Number. See any stock page for the same calculation on dated, sourced inputs.
How to Interpret the Result
A stock is considered undervalued when its market price is below the intrinsic value calculated by one or more models. The margin of safety (difference between intrinsic value and price) represents your cushion against valuation errors. For PSX stocks, aim for a 20-30% margin of safety. When multiple models agree (e.g., Graham Number and DCF both show undervaluation), the signal is stronger.
Common Mistakes
1) Using too low a discount rate for PSX stocks ā 10-12% is not enough; use 16-22%. 2) Relying solely on one model ā each has blind spots. 3) Ignoring qualitative factors like circular debt, currency risk, and management quality. 4) Using the Graham Number for high-growth or asset-light companies. 5) Forgetting to update inputs when companies report new earnings.
Learn the Method
Free lessons that explain the ideas behind this calculator:
Frequently Asked Questions
How to Choose the Right Valuation Model for PSX Stocks
Each valuation model on SeekhKar serves a different purpose and is suited to different types of companies listed on the Pakistan Stock Exchange. Here is a practical guide to choosing the right model:
When to Use the Graham Number
The Graham Number works best for asset-heavy companies with reliable book values and earnings. On the PSX, this includes cement companies like Lucky Cement (LUCK) and DG Khan Cement (DGKC), banking stocks like HBL (HBL) and MCB (MCB), and oil and gas exploration companies like OGDC (OGDC) and PPL (PPL). These sectors have significant tangible assets that make the book value component meaningful.
To use the Graham Number, you need two numbers from the company's annual report: Earnings Per Share (EPS) and Book Value Per Share (BVPS). Both are available from the PSX website (psx.com.pk) under "Listed Companies" ā "Financial Statements."
When to Use DCF
The Discounted Cash Flow (DCF) model is best for companies with predictable, stable cash flows. On the PSX, this includes ENGRO Corporation (ENGRO), Nestle Pakistan (NESTLE), Hub Power Company (HUBC), and Mari Petroleum (MARI). These companies have relatively predictable revenue streams and operating margins.
DCF requires Free Cash Flow Per Share, which is calculated from the cash flow statement. For PSX stocks, we recommend using a discount rate (WACC) of 16-22% to account for Pakistan's country risk premium, PKR depreciation, and higher inflation.
When to Use P/E Relative
The P/E Relative model is a quick market-multiples approach that works as a sanity checkfor any profitable stock. Compare the stock's P/E ratio against its sector average ā cement stocks on the PSX typically trade at 8-12x P/E, while banking stocks trade at 5-8x, and consumer goods at 18-25x.
When to Use DDM
The Dividend Discount Model (DDM) is specifically for dividend-paying stocks. On the PSX, consistent dividend payers include PSO (PSO), OGDC (OGDC), MCB (MCB), FFC (FFC), and POL (POL). The DDM assumes constant dividend growth forever, so it is not suitable for companies that do not pay regular dividends.
Pro Tip: Use the Summary view to see all four valuations side by side. When the Graham Number, DCF, P/E Relative, and DDM all indicate the same direction, you have a higher-conviction signal.
Where to Find PSX Company Financial Data
All of our calculators require financial inputs from the company you are valuing. Here is where Pakistani investors can find reliable data for PSX-listed companies:
- Pakistan Stock Exchange (psx.com.pk): Official source for annual reports, financial statements, and company disclosures. Navigate to "Listed Companies" ā select the company ā "Financial Statements" to download PDF reports.
- State Bank of Pakistan (sbp.org.pk): For interest rates, monetary policy decisions, and PKR exchange rate data used in DCF discount rate calculations.
- SECP (secp.gov.pk): Securities and Exchange Commission of Pakistan for regulatory filings and listed company disclosures.
- Brokerage Research: AKD Securities, JS Global Capital, Topline Securities, and Insight Securities provide free research reports with EPS estimates and fair value targets for KSE-100 companies.