Stef’s Stock Comparison Worksheet: The Same-Dollar Test
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Two companies can both be called “cheap” while offering very different claims on future cash. This worksheet makes the comparison specific: what business do you get for the same dollar, what could impair it, and what evidence would change your mind?
Use this with two operating companies you already want to understand. Copy the template into a spreadsheet or notebook. It uses financial statements you supply; it does not fetch prices, score stocks, or generate a recommendation.
1. Put both businesses on the same clock
Record a valuation date and a financial reporting period before comparing a single ratio. Use the same currency and units. Separate trailing twelve months from a fiscal year, and reported results from management’s adjusted results. A recent acquisition can make a current enterprise value inconsistent with the historical earnings beneath it.
| Input | Company A | Company B |
|---|---|---|
| Company, ticker, and share class | Fill in | Fill in |
| Valuation date; currency; units | Fill in | Fill in |
| Financial period and filing link | Fill in | Fill in |
| Equity market value; valuation-date share count | Fill in | Fill in |
| Debt; cash; preferred equity; noncontrolling interests | Fill in | Fill in |
| Revenue; operating income; operating cash flow | Fill in | Fill in |
| Capital expenditure cash outflow, entered as positive | Fill in | Fill in |
| Diluted weighted-average shares, current and prior period | Fill in | Fill in |
2. Calculate the same measures
Basic enterprise value = equity market value + debt − cash Expanded enterprise value = basic EV + preferred equity + noncontrolling interests Simple free cash flow proxy = operating cash flow − capital expenditure cash outflow FCF margin = simple FCF ÷ revenue FCF yield to equity = simple FCF ÷ equity market value Operating earnings multiple = enterprise value ÷ operating income Share-count change = current diluted weighted-average shares ÷ prior-period shares − 1
Use consistent treatment of leases and restricted cash. The simple FCF proxy is a starting point, not a standardized accounting measure or owner earnings. It can be flattered by temporary working-capital changes and still reflect costs such as stock compensation imperfectly. If operating income or FCF is negative, show the negative value and mark the related valuation multiple “not meaningful” rather than turning it into a bargain signal.
3. Try the same-dollar test
These are fictional companies, with all figures in millions and matching periods. Ignore preferred equity and noncontrolling interests in this simplified example.
| Measure | Company A | Company B |
|---|---|---|
| Equity market value | 8,000 | 8,000 |
| Debt; cash | 1,500; 500 | 300; 1,300 |
| Enterprise value | 9,000 | 7,000 |
| Revenue | 3,000 | 2,000 |
| Operating income | 600 | 350 |
| Operating cash flow; capex | 550; 150 | 650; 150 |
| Simple FCF; FCF margin | 400; 13.3% | 500; 25.0% |
| Simple FCF yield to equity | 5.0% | 6.25% |
| EV / operating income | 15.0× | 20.0× |
B has more cash generation relative to its equity price in this snapshot, while A has the lower operating earnings multiple. The useful next question is why. Is B collecting unusually large customer prepayments? Does A need recurring replacement capex? One ratio cannot settle those questions.
4. Write the missing explanation
- What portion of cash generation is repeatable? Check receivables, inventory, customer advances, and one-time payments.
- How much dilution offsets growth? Read the stock-compensation notes and changes in diluted shares.
- Who funds the next three years: customers, lenders, or new shareholders?
- What is the strongest documented reason to prefer the other business?
- What event would make this comparison obsolete: an acquisition, refinancing, accounting change, or new filing?
Copy this decision memo
Comparison date: Companies and share classes: Matching financial periods: Primary filing links: What A sells and who pays: What B sells and who pays: EV bridge and cash-flow definitions: The biggest accounting mismatch: The assumption that matters most: The strongest contrary evidence: What I still cannot explain: Next review event and date: Conclusion: research further / monitor / pass
When this worksheet needs a different model
Banks, insurers, REITs, and early-stage businesses can require substantially different measures. Do not force their economics into an industrial-company EV/operating-income comparison. A missing or unsuitable metric is a reason to change the model, not invent a number.
Questions readers ask
Is the lower multiple always better?
No. A lower multiple can reflect weaker economics, accounting differences, a cyclical earnings peak, or greater risk. The worksheet identifies the question; your source work supplies the answer.
Where should I get the inputs?
Start with company filings and investor relations materials. Investor.gov’s guide to reading a 10-K explains the filing’s main sections. For related reading, see enterprise value versus market cap.
By Stefan Cheplick. Educational research tool; no buy/sell recommendations. Read the site disclaimer.