1J·

"Cheap ≠ fallen" - How to find the intrinsic value of a company

Status: August 1, 2025

Everyone is currently talking about Novo Nordisk - and many are buying it after the massive price drop because the share is now supposedly "cheap".

But be careful: a price drop of -70 % can be a bargain - but it doesn't have to be.

At the end of July, Novo Nordisk collapsed after a forecast reduction by a further 33 %. The new price simply reflects weaker growth and new risks - not necessarily an undervaluation.

The crucial question:

How do I find out whether a share is actually cheaply valued - or whether the market has simply become more realistic?

There are several approaches to this. One of the most popular - and in my opinion the most sound for many investors - is the discounted cash flow method (DCF).

📌 Important:

The model cannot macro events (interest rate shocks, recessions) or political surprises - such as a sudden price cap on 🍊 medicines.
A sharp fall in prices can trigger a short-term technical countermovement (rebound) in the short term - this can be interesting for traders. But for long-term investors, the decisive factor is whether the share is fundamentally is undervalued.

💡 Why DCF?

DCF analysis is so popular because it not only looks at current key figures such as P/E ratios or price/sales, but also evaluates the true core of a share:

How much money will this company earn in the future - and what is this cash flow worth today?

The model forces you to make all important assumptions openly:

expected sales growth
profit margins
Investment requirements (CapEx)
capital costs (WACC)
and a long-term, realistic growth target (terminal growth).

Although this makes DCF somewhat more labor-intensive than simply "comparing the P/E ratio with the industry average", it provides a company-specific fair value. company-specific fair value instead of just a relative market opinion.

🤨 Sounds complicated?

There are ready-made spreadsheets for calculating the DCF where you have to enter current data manually.

It's easier with AI.

Particularly capable models such as ChatGPT-o3 or "deep research" (ChatGPT, Gemini, etc.) do not provide an infallible analysis (always double check), but they do research the necessary data for you.

✏️ DIY-Prompt (UPDATE: August 3, 2025)

"[Please insert TICKER]

1. data basis: Use the latest 10-K/10-Q/20-F/6-K/Half-Year-Report (≤ 90 days old) and the current investor presentation.

2. segmentation: Use the segments shown in the report; without segment info → Group as a whole.

3. input data (per segment, amounts in billions): Sales TTM, EBIT TTM, EBIT margin, FCF conversion = (EBIT×(1-Tax)-ΔWC-CapEx)/EBIT, Beta, WACC. Net debt = cash - debt ± pension/lease liabilities; take off-balance liabilities > 5% sales into account.

4. WACC:

- rf = yield on 10-year government bond of reporting currency; MRP = 5.5 % (developed markets, plus country risk premium for emerging markets).

- Beta from 24-month regression against home or sector index.

- Kd (after tax) = average of the last 4 quarters interest expense/gross debt × (1-effective tax rate).

- Capital structure by market value (D/V).

5. forecasts (5 years):

- Sales CAGR: Select smaller value from 5-year history and analyst consensus; if growth rates are historically extremely high (> 10 pp above consensus), model a flattening path.

- EBIT margin: Linear path from 3-year average towards management guidance; justify deviations > ±3 pp.

- CapEx (% sales): Median of the last 3 years as a basis; increase for announced major investments.

- Tax rate: Ø effective tax rate of the last 3 years or statutory rate.

- Buybacks: Ø of the last 3 years, capped at 80% of the forecast FCF.

6. valuation: mid-year discounting; terminal value = 60 % perpetuity (long-term inflation + 0-0.5 pp, max. 2.5 %) + 40 % EV/EBITDA exit multiple (median of the last 5 years or peer median, max. 20×). Three scenarios (bull/base/bear) with adjustments to sales CAGR, margins, CapEx, WACC; additional Monte Carlo simulation (1,000 runs) on WACC, terminal growth and margins.

7th edition:

- Input table.

- DCF summary with segment EV, group EV, net debt and fair value per share (home currency + USD).

- Sensitivity heat map for ΔWACC ± 0.5 pp × ΔTerminal-g ± 0.25 pp.

- Monte Carlo histogram.

- Conclusion (≤ 200 words) on spot price, fair value range, key drivers and risks.

8. plausibility checks: segment totals vs. group ≤ 1 % deviation; mark assumptions that significantly exceed historical ranges; round to one decimal place; run model in reporting currency and additionally show fair value in USD with FX rate."

📌 DCF analysis results of 3 examples: (UPDATE: August 3, 2025)

Excerpts from the calculation with Gemini 2.5 Pro Deep Research:

Novo Nordisk $NOVO B (+1,26 %)

📈 BULL: 415,50 DKK
⚖️ BASE: 332,83 DKK
📉 BEAR: 255,75 DKK

Although the recent fall in the share price has made the share more attractive, our fundamental analysis suggests that the risks remain considerable. The calculated intrinsic value in the base case scenario offers a limited margin of safety from the current share price. The discrepancy between our more conservative valuation and the more optimistic analyst consensus indicates a high degree of uncertainty.

Given the balanced risk/reward profile and the possibility of further negative surprises related to competition and market penetration, we rate Novo Nordisk's stock a HoldHold. We set a 12-month price target of DKK 333.00which corresponds to our DCF value in the base case scenario. A re-rating would be justified if the company demonstrates a sustained stabilization of its market share in the US and successfully curbs the threat from the compounding market.

Alphabet $GOOGL (-2,86 %)

📈 BULL: $272.80
⚖️ BASE: $214,50
📉 BEAR: $168.20

The analysis results in a fair value of $214,50 per share in the base scenario, with a range of $168.20 to $272.80. Compared to the current share price of around $189, this indicates an undervaluation. The valuation is largely driven by the pace of margin expansion at Google Cloud and the successful, cost-efficient integration of AI into the core search product. The main risks arise from the uncertain financial impact of the antitrust proceedings and the immense capital expenditure for competition in the AI sector, which will weigh on free cash flow in the short term. The wide valuation range reflects the high level of uncertainty surrounding these key strategic and regulatory factors.

Microsoft $MSFT (-3,8 %)

📈 BULL: $652.3
⚖️ BASE: $545,8
📉 BEAR: $465.1

The fundamental analysis carried out results in a fair value of $545.8 per share in the base scenario. This indicates a slight undervaluation compared to the current price level. The share is trading comfortably within the fair value range derived from the scenario analysis and the Monte Carlo simulation.

The investment thesis is positive and is based on the assumption that Microsoft can successfully translate its leading position in AI transformation into sustainable, profitable growth. The strategic foresight of the management, the technological leadership position and the financial strength of the company outweigh the considerable but manageable risks. Although the massive investment phase is putting pressure on free cash flow in the short term, it is laying the foundations for the next growth decade. For long-term investors, the share represents an attractive investment opportunity at the current level in order to participate in the fundamental technological shift towards the cloud and AI.

FAQ - Why this DCF prompt is optimized

Flexible for all sectors: Rules fit growth, value, defensive and cyclical stocks.
Avoids overoptimism: Sales growth is limited by the smaller value from history and analyst consensus.
Realistic margins & CapEx: Guided by 3-year average and known investment plans.
Clean cost of capital calculation: WACC is accurately determined using current market data (rf, beta, MRP).
Segment accuracy: Results per division and comparison with group total for plausibility check.
Risk adjustment: Scenarios + Monte Carlo simulation cover uncertainties.
Compact structure: Little continuous text, clear flow → insert and process quickly in AI chat.

Sense of bull/base/bear cases with large spread:

Shows how much the fair value depends on key assumptions.
Quantifies opportunities (bull) and risks (bear) alongside the most realistic estimate (base).
Large spread indicates high uncertainty - important for investment decisions.
Helps to classify and relativize "best-case euphoria" or "worst-case panic".

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39 Commentaires

Chris@Multibagger

Very interesting approach and clearly explained. Thank you for that👍

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Mo@BigMo

@Multibagger With pleasure! I think that Novo could be interesting here for a short-term trade.
Even if the price continues to fall, it wouldn't be a long-term trade for me. Not because of the valuation but because of the sector.

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Chris@Multibagger

@BigMo I'm trading them with a derivative anyway. Not interesting for me in the long term anyway.

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Tenbagger2024@Tenbagger2024

Aktienfinder, for example, always starts very low. And tells me a fair value of 370$ , which corresponds to an overvaluation of Microsoft.

https://aktienfinder.net/aktien-profil/Microsoft-Aktie

But I find the approach very exciting and thank you for it.

In the case of Novo, it shows me an undervaluation.
Because the classic approach is being followed here.

https://aktienfinder.net/aktien-profil/Novo%20Nordisk-Aktie

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Mo@BigMo

@Tenbagger2024 Thank you! As I understand it, Aktienfinder uses the Peter Lynch formula and not DCF.
Aktienfinder looks at the growth of the past years, while DCF estimates the expected cash flow in the future.
This naturally leads to larger deviations.

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Tenbagger2024@Tenbagger2024

@BigMo
Yes, I find it interesting that Aktienfinder also calculates with the average P/E ratio or KCV and compares it with the current one.
But what I don't understand is that (PEG) puts the P/E ratio of a financial year in relation to the expected earnings growth in the coming financial year.
And the PEG for
Microsoft
2025 2,88
2026. 2,11
2027. 1,59

Novo
2025. 0,74
2026. 0,74
2027. 0,86

This means that Novo is also very attractive right now. And almost screams buy me.

Even taking into account that Microsoft is a tech stock.

I therefore see Novo as a more attractive value right now.
Even if I assume that it will take some time until normality returns here.
🍊 It's also unsettling

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Mo@BigMo

@Tenbagger2024 What bothers me about Novo is also the nature of the industry.
Perhaps the low PEG at Novo is more of a risk discount here.
Because the PEG looks at profit growth, not free cash flow. Microsoft has strong cash flows despite high CapEx.
Novo must first invest billions in production before FCF follows suit.
I also see adverse regulation as less of a risk in tech than in pharma.

In the short term, however, I still see an upside opportunity for Novo.
However, I would rather buy Tech in the event of further setbacks.

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Tenbagger2024@Tenbagger2024

@BigMo
All exciting questions. And in the end, you can see to what extent valuations play a role with Palantir.
Even if Novo is attractive right now, I have some more interesting stocks in the pharma sector.
And I wrote here weeks ago that the air is getting thinner and thinner at Novo. And more and more competitors are taking a piece of the pie.
I think we will have a few more opportunities to buy cheaply in the tech sector in August and September.
Just look at the correction at Amazon.

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Schweizer_Investor@Alumdria

Mega cool contribution with added value, thanks for that😁

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The W.@thewolfofallstreetz

Good article! Cheap stocks or stocks that have fallen sharply are not automatically worth buying. If fundamentals and therefore future cash flows deteriorate, there will be a rebalancing of the share price. Don't understand why people blindly invest in stocks that have fallen without knowing what they are getting into. Expensive shares are not automatically unattractive - on the contrary. In most cases, it is precisely those companies that prove time and time again that they are the best in their category and that repeatedly outperform. That has its price. For example, I bought a Palantir tranche at a P/S of 20x and it still turned out to be a 6x investment.

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Mo@BigMo

@thewolfofallstreetz Thank you! Just a thought-provoking impulse to take a closer look at the fundamentals.
As the discussion in the comments shows, there are certainly valuation criteria according to which Novo is now favorable.
However, everyone must also assess whether these are sufficient for a purchase in the specific sector.

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BamBamInvest@BamBamInvest

@BigMo Add $UNH 😁 and we have what feels like the two stocks where everyone is reaching for the falling knife alongside $NOVO B ✌️

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Mo@BigMo

@BamBamInvest
😬 Here is the DCF analysis for $UNH with ChatGPT o3:

We have assumed a base free cash flow of USD 18bn (2025) for UnitedHealth Group, growing by 6% annually until 2029; thereafter we assume a perpetual growth of 2% and discount everything with a WACC of 7.5% (large-cap healthcare average)

This results in a fair value of around USD 377 per share - a good 37% above the current share price of ~USD 238.

The model is based on moderately conservative assumptions: normalized margins from 2026, stable Medicare Advantage rules and no major cash outflows.

However, significant risks such as permanently higher medical costs, possible penalties from DOJ/CMS audits, political price regulation and continued high cyber security expenditure at Optum are NOT included.
Should these factors hit harder than expected, the calculated undervaluation buffer could quickly shrink or disappear completely.

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BamBamInvest@BamBamInvest

@BigMo thanks for the effort, I'm getting a similar result, just a little more optimistic 😁

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Karl@Karl_

@BigMo The question is whether the WACC is correct here. Due to the strong sell-off in $UNH since the beginning of the year, the return on equity should also have roughly doubled. If you now take the average WACC, the risk is not fully reflected in what the market currently sees, as the sell-off is not reflected strongly enough in the average. So apparently the market is pricing in a strong skepticism towards a timely mean reversion of margins. Of course, this can work, but most of the time the market is not so wrong and I would not base the investment decision purely on the key figures. The story is at least as important. But I am also invested in UNH, equity around €235.

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Mo@BigMo

@Karl_ Even with a 9% WACC (extremely conservative), the intrinsic value would still be roughly USD 310 - still above the price of ~USD 238.
But I agree with you: the current price signals that the market is pricing in more dramatic permanent damage than the base scenario of the DCF does.

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Christoph@ChrisBizz

Great contribution! 👍🏻👏🏻

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Elsa E.@EpsEra

Mehrwert..klasse 👍

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C_Montgomery_Burns@C_Montgomery_Burns

Bookmarked right away 🔖. Thanks for that!

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ValueDragon@ValueDragon

Very good contribution, thank you 👍

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Sahnehäubchen 🦋.@Savvy_investor_2000

Is a WACC of 7% realistic for Novo in your view?

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Mo@BigMo

@Savvy_investor_2000 These were the assumptions:
For Alphabet and Microsoft, we assume a WACC of around 7.5-8.0% - both are financially strong, have relatively low debt risk and similar risk premiums. We set Novo Nordisk's WACC slightly lower at around 7%, as pharmaceutical stocks are often less cyclical.

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Sahnehäubchen 🦋.@Savvy_investor_2000

@BigMo
Thank you. But that's still a rather conservative calculation for Novo, isn't it?

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aminemeskni@Aminmeskini

I have watched many Youtubers with many different DCF models and everyone comes up with different results. And almost all of them calculated a much higher price for Novo than you did. I did the math myself and came up with a higher value myself. I used accountless dcf on the internet to do it.

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Mo@BigMo

@Aminmeskini This is because the starting assumptions in the model are crucial.
AI can help here by using industry averages or other fundamental data to find optimized values.
Whenever forward-looking assumptions are used, there is an increased variance.

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0LIV3R@PIXELINVESTOR

Just ran with the prompt you mentioned using the last two presentations of AV for 2024 and Q1-2025 for $HDD.

Chat GPT says:

Heidelberger Druckmaschinen AG stock appears significantly undervalued - even under conservative assumptions (€55m FCF, 5% growth, 7% WACC, 2% perpetual growth):
The fair price according to DCF is € 4.92
The current market price is € 2.11
This results in a valuation gap of around 57 %

⸻

Interpretation

This can mean:
The market anticipates risks that are not or not sufficiently reflected in the DCF (e.g. economy, capital market, US tariffs, structural change)
Or: The market overlooks opportunities, e.g. efficiency programs, technology potential, defence business, China expansion
Long-term investors with confidence in the management and structural turnaround could find value here.

Investing.com currently says that the fair value is currently €2.71. In other words, a valuation gap of 22%. Unclear how the AI behind it calculates this. It's lower than ChatGPT, but both are still significantly higher than the share price is now. Exciting. In any case, thanks for the article.

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sakamotoo@sakamotoo

Top, thank you 🫶🏼

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Jarod@Jarod

Top. Explained clearly, even for less experienced investors.
This can be useful to many. 👍🏼

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gwf_07@gwf_07

Sorry but your FCF si very wrong for Microsoft and google. If you use flawed indicators as input, you will get a flawed result.

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Christian@christian

Thanks!

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XRPatrick@XRPatrick

14H

Super ! Thank you very much !

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Karl@Karl_

Interesting contribution. However, I think that a WACC of 7% is already very low for the values mentioned. And a pure model with the WACC as the capitalization rate doesn't offer me much as an investor either, as it only says something about the objectified company value. In my opinion, however, investing is rather subjective.

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Jarod@Jarod

I tested it promptly with the value of Dollar Tree. Gemini itself was unable to provide an answer to this question, along with very detailed information on the calculation.
Only with the inclusion of deep Research do I get a detailed result, which I will now take to heart and try to draw conclusions from. 😉

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Mo@BigMo

21H

@Jarod As I said, in my experience only ChatGPT o3 and the deep research models can currently do this.
I will update the article soon with an optimized prompt so that the output of the result is more accurate and consistent.

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Jarod@Jarod

19H

@BigMo Good idea. I've already thought about playing around with it to get the relevant data as a result.
The effects of deep research are very comprehensive and interesting, but there is a lot of it.

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Mo@BigMo

18H

@Jarod I find the level of detail helpful as long as there are representative figures in the base/bear/bull case at the end.
That way you can at least understand the figures used if necessary.
Since variable assumptions have a strong impact on a stock valuation, AI analysis can provide an advantage over fixed calculation models.
Not a crystal ball for a definitive purchase decision, but a very helpful indicator for me.

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Jarod@Jarod

18H

Absolutely 👍🏼 I did this yesterday for fun with BYD and therefore the share should be heavily undervalued at the moment.

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Bernhard@burnheart

The main question with NN is whether the forecast decline in free cash flow for 2025 is temporary or not. There is enormous potential and there are many indications that NN's market position will stabilize again. That is also the bet on it. This also changes the calculation of the DCF. Ultimately, the future is always anticipated with shares. In many sectors - such as pharmaceuticals - the future cash flow is not so constant and easy to forecast. This results in great opportunities for returns, but also with greater risk. In the case of NN, however, many currently see good opportunities with manageable risk. And this is not because they are simply looking at where the share price has been without looking at the fundamentals.

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Mo@BigMo

11H

UPDATE August 3, 2025:
I have updated the article with my current, more specific prompt, as well as an excerpt from the DCF analysis results of the 3 sample stocks.

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