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How to use MarketMath
The site answers three questions about any company: is the business good, is the price reasonable, and what would have to be true for a buyer to do well? This page gives you the minimum concepts, then three concrete workflows using live pages.
The six concepts that carry everything
CAGR — compound annual growth ratefull reference →
The single growth number that summarizes a multi-year change: the constant yearly rate that turns the starting value into the ending value. If revenue went from $100B to $161B in five years, the CAGR is 10% — because $100B × 1.10⁵ ≈ $161B. We show CAGRs over 3, 5, 10 and 15 years so you can see whether growth is durable or a recent spurt. One good year is noise; a 10-year CAGR is a track record.
Free cash flow (FCF)full reference →
Cash generated by operations minus capital spending — the money that's actually left over for owners after running and maintaining the business. Earnings can be shaped by accounting; cash is harder to fake. Most valuation on this site is anchored to FCF. Caveat: banks and insurers report cash flow differently, so FCF-based metrics show “—” for them.
Yields — the price tag, invertedfull reference →
FCF yield = FCF ÷ market cap. It restates the price as “what return would I earn if the business never grew?” A 5% FCF yield competes directly with a bond; a 1.5% FCF yield means most of your return must come from future growth. Shareholder yield adds dividends + buybacks: what the company actually hands back each year.
DCF — discounted cash flowfull reference →
The value of a business is all its future cash, discounted back to today (cash next decade is worth less than cash now). A DCF takes a growth assumption and produces a value. The problem: tiny assumption changes swing the answer wildly. That's why the site leans on the reverse version.
Reverse DCF — reading expectations out of the pricefull reference →
Instead of guessing growth to get a value, start from the market cap and solve for the growth that would justify it. Now you have a testable claim: “this price needs 19% FCF growth for a decade.” Compare that to what the company has actually done. You don't need to predict the future — only to judge whether the embedded assumption is plausible.
Quality score and red flagsfull reference →
A 0–100 composite of profitability, growth, consistency, balance-sheet strength, and capital discipline — with every weight documented. Red flags are mechanical threshold checks (revenue shrinking, dilution, debt over 5 years of FCF…). Neither is a verdict; they tell you where to look before you commit money or move on.
Workflow 1 — Judge one company in ten minutes
Example: open COST (Costco) and read the page top to bottom — it's ordered as an argument.
Header: what kind of company is this?
The badges classify it (Peter Lynch style: slow grower / stalwart / fast grower) and score its quality. A “Stalwart · Quality: High” with zero red flags reads very differently from a “Fast grower · Quality: Low” with four.
“What today's price assumes” — the expectations check
This is the reverse DCF in one sentence. If it says the price assumes 12% FCF growth and history delivered 13%, you're paying for a repeat of the past — reasonable. If it assumes 19% and history is 8%, the price needs acceleration that hasn't happened yet. That gap is the whole investment question.
Growth record + fundamentals charts: is the machine real?
Look for bars that climb steadily (revenue, net income, FCF) and one that falls: diluted shares. A falling share count means every remaining share owns more of the business. Choppy or flat bars → the growth story is weaker than the narrative.
Track record: did owners actually get paid?
The $100-vs-SPY cards answer “would I have beaten the index just holding this?” The $1 test asks Buffett's question: did each dollar of retained earnings create at least a dollar of market value?
Quality & capital discipline + red flags: what could hurt me?
Check debt (≤3 years of FCF is comfortable), stock compensation (≤15% of FCF), and sales efficiency (how much capital each new dollar of revenue requires). Then read each red flag — each one is a specific question to answer in the 10-K, linked at the bottom of the page.
Workflow 2 — Find ideas without a stock tip
Start from a preset, not a blank filter
Open the screener and pick a preset that matches what you're hunting: Quality compounders (great businesses at any price), Low expectations (good businesses the market has given up on — implied growth ≤4%), or Shareholder yield (cash returners). The rules of every preset are printed above the table — nothing is hidden.
Sort to sharpen
Within a preset, click a column to sort. Example: in Quality compounders, sort by FCF yield descending — the top rows are the highest-quality businesses at the least demanding prices right now.
Shortlist three, then run Workflow 1 on each
The screener finds candidates, never answers. A stock that screens well can still have a broken story — that only shows up on the company page and in the filings.
Workflow 3 — Choose between rivals
Compare trajectories, not sizes
Open Compare with V, MA, AXP. Everything is indexed to 100 at the common start year, so a $500B company and a $100B company are judged on the same axis: who compounds faster.
Check who grows cheaply
The sales-efficiency table shows the capital cost of growth — dollars of new plant and equipment per dollar of new revenue. Under $0.50 is capital-light; a climb toward $1+ (as with the AI-datacenter builders recently) means growth is getting expensive to buy.
Let the reverse DCF break the tie
When two businesses are comparably good, open each in the reverse DCF tool and compare implied growth against each one's history. Prefer the one where the market is asking for less.
Habits that make the tool work
- Read the 10-year record before the price. Deciding quality first keeps the valuation honest.
- Treat every flag and score as a question, not a conclusion — the answer lives in the 10-K.
- Compare yields to the risk-free alternative: a 2% FCF yield has to out-grow a ~4% Treasury by a lot.
- Missing data is information: “—” often means the metric doesn't apply (banks), not that it's zero.
- Revisit quarterly, not daily. Fundamentals move at 10-K speed.
Deeper material: the metric reference and guides cover every formula on the site.