Question 1

How does the stock valuation calculator work?

Accepted Answer

The calculator takes a company's revenue, operating margin, interest, depreciation, tax rate, equity capital, and face value to compute EPS (Earnings Per Share) through a full P&L model. It then multiplies EPS by various PE ratios to project target prices and market caps.

Question 2

What is the PE ratio method of stock valuation?

Accepted Answer

The PE (Price-to-Earnings) ratio method values a stock by multiplying its EPS by a chosen PE multiple. For example, if EPS is ₹50 and the PE ratio is 25x, the implied stock price is ₹1,250. Different PE multiples represent different growth expectations.

Question 3

How is EPS calculated from the P&L statement?

Accepted Answer

EPS = (PAT / Equity Capital) × Face Value. First, calculate EBIT (Revenue × Operating Margin), subtract Interest and Depreciation to get PBT, apply Tax Rate to get PAT, add Other Income if any, then divide by shares outstanding (Equity Capital / Face Value).

Question 4

Can I use this calculator for future year projections?

Accepted Answer

Yes. Enter your projected future revenue, expected margins, and estimated interest/depreciation for any target year. The calculator will compute the forward EPS and show what the stock price would be at various PE ratios, helping you model 1-year, 3-year, or 5-year price targets.

Question 5

What PE ratio should I use for valuation?

Accepted Answer

The appropriate PE ratio depends on the company's growth rate, sector, and market conditions. Fast-growing companies often trade at 30-50x PE, while mature companies trade at 10-20x. Compare with the sector average, the company's historical PE, and NIFTY PE to choose realistic PE scenarios.

Future Valuation Calculator