Valuation Attractiveness Score¶

Measures whether a stock is attractively priced based on five complementary valuation signals.

Score: 0–100 (higher = cheaper / more attractive) Rating: attractive (≥65) | fair (40–64) | expensive (20–39) | overvalued (<20)

Signals¶

Signal	Weight	Logic
Earnings Yield vs Risk-Free	25%	E/P − 10yr treasury; excess yield mapped to 0–1
FCF Yield	25%	FCF / Market Cap; 5%+ = high score
EV/EBITDA	20%	< 8x = excellent, > 20x = poor
Price-to-Book	15%	< 1.5x = excellent, > 6x = poor
DCF Upside	15%	margin of safety to intrinsic value (optional)

Missing signals receive a neutral score (0.50) so partial inputs still yield meaningful results.

Usage¶

PythonTypeScript

from fin_ratios.utils.valuation_score import valuation_attractiveness_score

score = valuation_attractiveness_score(
    pe_ratio=15.0,         # trailing P/E
    ev_ebitda=9.0,         # EV/EBITDA
    p_fcf=14.0,            # Price/FCF
    pb_ratio=2.0,          # Price/Book
    dcf_upside_pct=25.0,   # 25% margin of safety to DCF
    risk_free_rate=0.045,  # 10yr treasury
)

print(score.score)          # 75
print(score.rating)         # 'attractive'
print(score.table())

import { valuationAttractivenessScore } from 'fin-ratios'

const score = valuationAttractivenessScore({
  peRatio: 15.0,
  evEbitda: 9.0,
  pFcf: 14.0,
  pbRatio: 2.0,
  dcfUpsidePct: 25.0,
  riskFreeRate: 0.045,
})

console.log(score.score)   // 75
console.log(score.rating)  // 'attractive'

Alternative Inputs¶

You can provide yield percentages directly instead of ratios:

score = valuation_attractiveness_score(
    earnings_yield_pct=6.5,   # 1/PE → 6.5% (overrides pe_ratio)
    fcf_yield_pct=5.2,        # FCF/MarketCap → 5.2% (overrides p_fcf)
)

Earnings Yield Scoring Detail¶

The earnings yield signal compares E/P against the risk-free rate:

E/P − rf = +4%+ → score 1.0 (strong equity premium)
E/P − rf = 0% → score ~0.5 (parity with bonds)
E/P − rf = −4% → score 0.0 (stocks yield less than bonds)

This implements the Fed Model logic (Yardeni, 1997), adjusted to avoid its known flaws by using excess yield rather than absolute comparison.

References¶

Damodaran, A. (2012). Investment Valuation (3rd ed.). Wiley.
Greenblatt, J. (2010). The Little Book That Still Beats the Market.
Shiller, R.J. (2000). Irrational Exuberance. Princeton University Press.