GF Value for S&P 500
The S&P 500 GF Value is calculated using data from the S&P 500 index, representing its current intrinsic value. GuruFocus' proprietary methodology determines this value to provide an overview of the fair value at which the S&P 500 index should trade. The line of the GF Value on this page visually represents this estimate of the index's fair value.
To calculate this value, GuruFocus follows these steps:
- We analyze historical correlations between the index price and key performance metrics, such as revenue, earnings, cash flow, and book value.
- We identify the metrics with the strongest historical correlation to the index price and determine the historical multiples at which the index has traded relative to these metrics.
- Using these historical multiples as a reference, we estimate the fair value of the index while accounting for future growth projections. Adjustments may be made based on the index's historical returns and growth trends.
The line of the GF Value on the graph shows the trend of the fair value over a period of time. GuruFocus believes that the line of the GF Value represents the fair value at which an index should be. Index prices typically fluctuate around this line. If the price of an index is significantly above the line of the GF Value, it is considered overvalued and its future returns are likely to be lower. Conversely, if the index price is significantly below the line of the GF Value, its future returns are likely to be higher.
GF Value for Individual Stocks
GuruFocus also calculates the GF Value for individual stocks using the similar methodology. Based on the relationship between a stock's current price and its GF Value, we provide the following six ratings:
| Posssible Evaluations | All-in-One Screener Examples (2) |
|---|---|
| Possible Value Trap, Think Twice (1) | Predictable Companies that possibly be Value Traps |
| Significantly Overvalued | Predictable Companies which are Significantly Overvalued |
| Modestly Overvalued | Predictable Companies which are Modestly Overvalued |
| Fairly Valued | Predictable High Quality Companies which are Fairly Valued |
| Modestly Undervalued (3) | Predictable High Quality Companies which are Modestly Undervalued |
| Significantly Undervalued (3) | Predictable High Quality Companies which are Significantly Undervalued |
Please note that the "Possible Value Trap, Think Twice" rating applies only to individual stocks. It's for companies that appear to be significantly undervalued but are either experiencing a long-term business decline or facing financial distress.
- "Possible Value Trap, Think Twice" applies to companies that appear significantly undervalued but are either experiencing a long-term business decline or facing financial distress.
- These are some simple examples. You can access our GF Valuation filter under All-in-One Screener’s Fundamental tab, and Price-to-GF-Value filter under Valuation Ratio tab and set your own criteria.
- A sufficient margin of safety exists only when the stock is undervalued.
