Sticker Price
The estimated intrinsic value of a stock — the price it should be worth today based on its future earnings potential.
What is Sticker Price?
Sticker price is what a stock should be worth today if the market were perfectly rational. It's calculated by projecting future earnings out 10 years, applying a reasonable valuation multiple, and discounting that back to present value.
Think of it like a price tag on an item at a store. If the sticker price is $100 but the store is selling it for $50, you're getting a bargain. If it's selling for $150, you're overpaying. The same logic applies to stocks — if the market price is below sticker price, the stock may be undervalued.
Sticker price is also known as intrinsic value or fair value. Different investors calculate it differently, but the core idea is the same: estimate what the business is truly worth, independent of its current market price.
Why it matters
The market is volatile. Stock prices swing wildly based on news, sentiment, and speculation. But the underlying value of a business changes much more slowly. Sticker price gives you a rational anchor — a reference point to judge whether the current price is too high, too low, or about right.
If you only buy stocks when they're trading below sticker price (with a margin of safety), you dramatically increase your odds of success. You're not gambling on price movements — you're buying dollars for fifty cents.
How it's calculated
PaybackPrice calculates sticker price using a 10-year earnings projection model:
Step 1: Project future EPS
Future EPS = Current EPS × (1 + Growth Rate) ^ 10
Step 2: Estimate future stock price
Future Price = Future EPS × Future P/E
Step 3: Discount to present value
Sticker Price = Future Price / (1 + Discount Rate) ^ 10
Growth Rate
The lower of: historical EPS growth rate or analyst estimates. Capped at 25% for conservatism.
Future P/E
The lower of: historical average P/E or 2× growth rate. Capped at 50 for conservatism.
Discount Rate
Minimum acceptable return. PaybackPrice uses 15% — the rate at which your money doubles every 5 years.
Example
Let's say a company has:
- Current EPS: $5.00
- Historical EPS growth rate: 12%
- Historical average P/E: 20
Step 1: Future EPS = $5.00 × (1.12)¹⁰ = $15.58
Step 2: Future P/E = min(20, 2 × 12) = min(20, 24) = 20
Future Price = $15.58 × 20 = $311.60
Step 3: Sticker Price = $311.60 / (1.15)¹⁰ = $311.60 / 4.05 = $77.04If the stock is trading at $60, it's below sticker price — potentially undervalued. If it's trading at $100, it's above sticker price — potentially overvalued.
How PaybackPrice uses it
PaybackPrice automatically calculates sticker price for any US stock using 10 years of historical data and analyst estimates. The result is shown alongside the current market price, so you can immediately see whether the stock is trading above or below its estimated fair value.
But sticker price alone isn't enough — you also need a margin of safety to protect against errors in your assumptions.
See sticker price calculated for any US stock — free:
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