How To Compute Fair Value Of Stocks. It is based on the premise that the fair value of a company is the total value of its future free cash flows (fcf) discounted back to today's prices. In other words, it discounts the sum of all the future dividends expected to be offered by a company to arrive at their present values.
In this case, we will also know the future stock’s price. It is based on the premise that the fair value of a company is the total value of its future free cash flows (fcf) discounted back to today's prices. We compute fair values for individual common stocks.