Core concept
What is the Payback Price?
5 min read
The Payback Price is the central number on this platform. It's the price at which you'd be getting a business at a 50% discount to our estimate of its fair value — your "buy now" signal.
Why not just buy at fair value?
Because no valuation is certain. When you project earnings 10 years into the future, you're making assumptions about growth rates, profit margins, and the broader economy — all of which can be wrong. The Payback Price is your cushion against being wrong.
If you buy at a 50% discount and your estimate of fair value turns out to be optimistic by 30%, you still haven't lost money. That's the power of a margin of safety.
How is it calculated?
The Sticker Price itself is derived from a 10-year earnings projection, discounted back at a 15% annual return hurdle. We cover this in detail in the Sticker Price article.
What does "On Sale" mean in practice?
When a stock's current price is below the Payback Price, we're saying that — if our analysis is correct — you're buying a good business at a meaningful discount to what it's worth. It doesn't predict where the price will go in the short term. Markets can remain irrational for a long time. But over a 10-year holding period, buying quality businesses well below fair value has historically produced strong returns.