IN PLAIN ENGLISH
A best-guess price tag for a stock based on future cash flows. If the fair value is higher than the current price, the stock may be undervalued.
FULL DEFINITION
An estimate of what a stock is worth today based on the cash the business is expected to generate in the future, discounted back to the present.
EXAMPLE
Fair value is $50 while the stock trades at $40, suggesting about a 20% discount to fair value.
Educational content only. It is not personal financial advice.