Net Present Value (NPV) Analysis

The NPV Analysis tab evaluates whether a stock is overvalued, undervalued, or fairly priced based on its Net Present Value (NPV). This analysis compares the company’s current market cap to two different NPV models: a conservative estimate and an optimistic scenario.

If a stock’s market cap significantly exceeds its NPV, it may indicate an overvaluation risk, while a market cap closer to NPV suggests a more reasonable valuation. The summary section provides a quick assessment, while the detailed tables break down the calculations, showing how much the stock’s valuation deviates from its projected NPV.

The NPV Analysis summary offers a quick, visual assessment of whether a stock is trading above or below its intrinsic value.

  • The color gradient and letter grade on the left reflect the overall valuation risk, with red indicating a high probability of overvaluation.
  • The text explanation on the right highlights the key reason for the rating—in this case, Apple’s market cap is more than three times its Net Present Value, suggesting a significant disconnect between price and projected financial fundamentals.

This summary helps investors instantly recognize potential valuation risks before exploring the detailed models below.

The two summary tables with green header rows provide a side-by-side comparison of the company’s current market cap versus its Net Present Value (NPV) under two different scenarios.

The left table uses a more conservative model to estimate NPV, resulting in a significantly lower valuation and a larger gap between price and value, which informs the “F” rating shown in the color gradient above.

In contrast, the right table uses a more optimistic model, projecting higher future cash flows and a closer—but still inflated—relationship between market cap and NPV.This optimistic view is included for context but does not affect the risk rating.

These tables help users evaluate how much of the company’s current valuation is supported by projected fundamentals under different assumptions.

This Current Net Present Value Model table provides a detailed breakdown of how the selected company’s NPV is calculated and compared to its market cap to assess valuation risk. Similar logic can be used to read the Optimistic Net Present Value Model.

  1. Top green row (Market Cap as % of NPV): This is the key takeaway. In our example, Apple’s market cap is 407.5% of its Net Present Value, meaning the company is trading at over 4 times what its projected cash flows and assets would justify. This signals high valuation risk.
  2. Current Financial Metrics: The next 8 rows list the selected company’s current financial data, including price, market cap, revenue, net income, tangible equity, and its recent growth rate and profit margin.
  3. 5-Year Net Income Projection: Based on the listed revenue growth assumptions, this section projects the company’s total revenue and net income over the next 5 years, then discounts that income back to present value using a 10% discount rate.
  4. Terminal Value Calculation: A terminal value multiplier (in this case, 1.00) is applied to Year 5 revenue to estimate a long-term value of the business beyond Year 5. This value is then discounted back to present day, providing a discounted terminal value.
  5. Total Net Present Value Components: This row adds together three components to estimate the company’s total NPV:
    • The discounted 5-year net income
    • The discounted terminal value
    • 50% of the company’s current tangible equity These values combine to a total NPV of $813,663 (in millions).
  6. Final Comparison: The last 3 rows restate the NPV comparison. In this example, Apple’s market cap is $3.3 trillion, which is over four times its NPV. According to this model, such a gap indicates the company is substantially overvalued and carries elevated investment risk compared to stocks where the market cap is below or near their NPV.