Fair Value and Margin of Safety are based on discounted cash flow (DCF) analysis. Please see this resource where you can understand the strengths and weaknesses of this approach. We use the WACC (Weighted Average Cost of Capital) for the discount rate and the growth rate for the first year is the Forward EBITDA Growth (or the industry average of that value when unavailable). This initial growth rate decays to the long-term average of the group so that by year 5 the assumed growth rate is 80% based on the group average and 20% on the stocks Forward EBITDA Growth.
Fair Value and related metrics update nightly. New cash flow values are typically only released on a quarterly schedule but expected growth rates for a stock and its industry update more frequently.
Many of the metrics used for this model are in the Fair Value and DCF Model folder as shown in our metric browser screenshot below.
