Methodology & worked example
P/E and P/B apply a user-selected comparable multiple to a compatible per-share accounting measure. The Gordon model discounts an assumed perpetual stream of annual common-share dividends using the required return on equity. Each model answers a different question; results are shown separately and are never averaged.
P/E estimate = positive EPS × selected comparable P/E
P/B estimate = positive common-equity BVPS × selected comparable P/B
DDM estimate = next annual dividend D1 / (annual equity return r − perpetual growth g)
Model price difference = (model estimate / positive user price − 1) × 100
Illustrative comparison
Illustrative values: EPS $5.00 × P/E 18 = $90.00; common-equity BVPS $40.00 × P/B 2.5 = $100.00; next annual D1 $4.00 / (8% − 3%) = $80.00. Against an illustrative $100.00 price, the model differences are −10.00%, 0.00% and −20.00%. These are separate examples, not a verified company statement.
Percent inputs are divided by100 in the formula. For example, 8%−3%=0.05, not5. A valid formula cannot verify the economic suitability of your assumptions.
Assumptions & sources
All initial values are ILLUSTRATIVE_DEFAULT assumptions. They are not actual company filings, current market quotes or recommended multiples. Changing an input makes it user supplied; Reset restores the example only.
Use nominal USD per common share and compatible annual data. Select the same trailing or forward basis for EPS and P/E. Check peer dates, accounting definitions, earnings quality and share dilution independently.
P/B is not price to tangible book. Sector economics, accounting rules and return on equity can make a peer multiple unsuitable. The calculator does not reconcile financial statements.
Enter D1, the next full annual dividend, directly. The required equity return is not WACC. Constant growth forever may be unrealistic; no multistage DDM, automatic D0 conversion or quarterly annualization is included.
A rate spread of 0.5 percentage point or less triggers an application warning. Supported plain decimals have at most six decimal places; r is positive up to 1,000%, growth exceeds −100%, and model outputs stay below 10¹⁸. These are product limits, not official valuation rules.
No live stock prices, SEC imports, tax calculation, precise dilution or automatic sector-multiple selection. Model differences are not expected returns or buy/sell signals. Source dates and editable context remain local and unverified.
Methodology references
- Equity Valuation: Concepts and Basic Tools — CFA Institute
- Discounted Dividend Valuation — CFA Institute
- Financial Ratios and Measures — NYU Stern · Aswath Damodaran
- Beginners’ Guide to Financial Statements — U.S. Securities and Exchange Commission
Methods checked 2026-11-02. Public reference pages accessible to the research client; U.S. access not verified. No official company figures or current market observations are used. Source accessibility and numerical verification are independent.
FAQs
What do the three estimated prices mean?
P/E uses earnings, P/B uses common-equity book value, and DDM uses future dividends. They rely on different assumptions. Compare their applicability rather than averaging them into a single target.
Why is a nonpositive EPS or BVPS not applicable?
A conventional positive earnings or book multiple needs a positive base. A negative arithmetic product would not be a normal trading-price estimate. Other models can remain available.
Can I mix trailing EPS with a forward P/E?
No. Match the basis controls, then check that the actual periods and peer assumptions are comparable. The tool blocks a declared mismatch but cannot verify your source data.
Is BVPS based on total assets?
No. Use book equity attributable to common shareholders per compatible common share. Do not substitute total assets or tangible book without changing the model.
Should I enter D0 or D1 in DDM?
Enter D1: the next full annual dividend per share. No growth is automatically applied to convert D0, and a quarterly payment is not silently multiplied by four.
Does no dividend mean the company is worth zero?
No. This DDM is not applicable without positive expected annual dividends. A cash-flow model such as the separate DCF calculator may be more informative.
What if the required return is close to growth?
The denominator becomes small and the estimate can be extremely sensitive. Equal or higher growth has no valid finite Gordon estimate. Invalid sensitivity cells show a reason instead of zero.
Is the market-price difference an investment return?
No. It compares a model estimate with your positive price. It has no holding period and does not include future payouts, risk or trading costs. An omitted date is explicitly shown as not provided.
Are my figures sent to the server?
No. Calculation entries, results and source context remain in browser memory. Share uses only the page link. Reporting and aggregate usage accept only their established minimal fields.