Definition
A stocks GAVA (pronounced like lava) is a measure of its intrinsic value. The GAVA (GuruFocus Automatic Value Appraisal) is calculated using a formula developed by GuruFocus and 4 pieces of public data:
Earnings
Dividends
Past Growth
Current Interest Rates
The GAVA also takes into account 3 special situations:
Unsustainable growth
Unprofitable growth
Inadequate earnings
The GAVA calculation is fully automated. And never requires more than 7 inputs:
Earnings
Dividends
Book Value
Revenue Growth Rate
EBITDA Growth Rate
Book Value Growth Rate
Stock Classification: Financial/Non-Financial
Every GAVA calculation uses 4 variables. The 3 additional inputs are only used to determine when special rules apply to a stock. Depending on which special rules apply to a stock, different metrics are used to calculate the stocks GAVA.
Unlike most measures of intrinsic value, the GAVA is equally applicable to holding companies, banks, railroads, retailers, and industrials.
The GAVA needs to be combined with a stocks business predictability rating before you can use it to make a buy or sell decision. The more predictable a company is, the more accurate its GAVA will tend to be.
Finally, never buy a stock simply because its GAVA is higher than its current price. Only buy a stock when there is a sufficient margin of safety. GuruFocus - following in Ben Grahams footsteps - recommends a margin of safety of 50%.
In other words, a stocks GAVA should be at least 1.5 times its price for the stock to be a good buy.
GAVA = (E + D) * (7 + (G-B))
(Earnings) E equals
FINANCIALS
The highest of:
10-Year Average Return on Equity * Book Value
10-Year Book Value Growth * Book Value
Moodys 30-Year AAA Bond Yield * Book Value
NON-FINANCIALS
The highest of:
10-Year Average Net Margin * Sales
Moodys 30-Year AAA Bond Yield * Book Value
(Dividends) D equals...
Dividends per share
(Growth) G equals...
FINANCIALS
The lowest of:
10-Year Revenue Per Share Growth
10-Year Book Value Per Share Growth
20%
NON-FINANCIALS
The lowest of:
10-Year Revenue Per Share Growth
10-Year EBITDA Per Share Growth
20%
(Bond Yield) B equals...
Moodys 30-Year AAA Bond Yield
Related Terms
Price/Sales Ratio,
Price/Earnings Ratio,
Price/Book Ratio,
Intrinsic Value (DCF Projected),
Intrinsic Value (DCF),
Intrinsic Value (DE),
Graham Number* All numbers are in millions except for per share dataFlagstar Bancorp, Inc. Annual Data
| Dec03 | Dec04 | Dec05 | Dec06 | Dec07 | Dec08 | Dec09 | Dec10 | Dec11 | Dec12 |
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| GAVA |
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Flagstar Bancorp, Inc. Quarterly Data
| Dec10 | Mar11 | Jun11 | Sep11 | Dec11 | Mar12 | Jun12 | Sep12 | Dec12 | Mar13 |
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| GAVA |
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European Shorting
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