Fair value per share

Fair value per share is an estimate of what a single share of a company is worth, based on a valuation model, rather than whatever price the market happens to be quoting today. In a discounted cash flow model, it is typically the last step.

The formula is:

Comparing fair value per share to a stock's actual price is the whole point of running the model. A fair value above today's price suggests the market may be undervaluing the company relative to the assumptions used. A fair value below it suggests the opposite, that today's price already assumes more than the model does.

It is an estimate built from assumptions, not a fact. Change the growth rate, margin, or discount rate feeding into the model, and the fair value per share changes with it.