When people first hear “calculate fair value,” many immediately picture three monitors, forty-seven Excel tabs and that one friend who questions every single number. That is exactly why I deliberately chose an entry point that is almost cheekishly simple. On fairvalue-calculator.com there is a free, manual fair value calculator that teaches you the idea of fair value in a practical way, without making you feel as if you were sitting in a tax audit. To get started you only need two numbers: earnings per share (the company’s profit divided by the number of shares, so EPS) and revenue growth, which we will simply call Growth.

In the background the calculator does something that is incredibly helpful for beginners. It combines two perspectives. On the one hand there is a fair value logic that I use as a quick valuation formula to get a rough estimate of what the stock is actually worth. On the other hand there is a built in reality check that keeps fantasy in check. You do not have to understand every line of these formulas to benefit from them. What really matters is that you choose those two inputs reasonably well, because that is where most mistakes happen.

With EPS the rule is simple. Take the last reported earnings per share from a quick Google search or from the annual report, and if you want to do it properly, orient yourself on the diluted EPS. That may seem like a small detail, but using diluted numbers protects you from creative accounting over the long run. You can find these values faster today than your bank can offer you an appointment. A handful of solid financial websites, a quick search for “stock name EPS”, and you are ready to go. Just remember that when you see “diluted EPS” that is the one you want.

Growth is where many people start to guess, even though the basic principle is really simple. You look at last year’s revenue and the current year’s revenue and derive the increase from that. If revenue goes from 100 to 110, that is 10 percent growth. There is no magic involved, it is just arithmetic like in everyday life. And again, you can find revenue figures online without any difficulty. Once you have those two inputs, you already have everything you need to feed the manual calculator and get a first rough assessment of your stock.

Now we get to the part that really makes a difference in practice. EPS and Growth do not behave nicely and in a straight line in the real world. A company can have a single year that is completely out of line because of one off effects, cyclical fluctuations, special write offs or an exceptional situation. If you take only that year, you end up with a picture that may look mathematically clean but is fundamentally misleading. This is the moment when many people either give up in frustration or start twisting numbers until the result looks nice. Both are bad outcomes. One costs you opportunities, the other costs you money.

This is why there are helper calculators that solve exactly this problem. You can enter several years of EPS data and get a smoothed value from them. It is not just a simple average, but a weighted average where more recent values count more than older ones. That makes sense because you want to know where the company stands today, not ten years ago. The series is also complemented by the median and by the geometric mean so that outliers do not completely distort your picture. A good example is Ford Motor Company. If you look at historical EPS data over several years, you immediately see how one crisis year can distort the entire series. That is exactly what smoothing is for. If you want to include more history, you simply add more years to the series instead of letting yourself be hypnotised by a single year.

The key takeaway from this is simple. One year outliers in a data series can be tamed by looking at three measures together: the median (the middle value of the series), the arithmetic mean (the average as you know it) and the geometric mean (the “middle point” of the series if every value were a point on a chart). Combined, they give you a smoothed base that you can use in a meaningful way. You will find that average calculator on the platform as well.

The same principle applies to growth. It also helps to look at a series, not a single moment. Take the revenue figures of Daimler over several years as an example. If you derive growth from that and then use the growth helper calculator to get an average, you end up with a smoothed growth rate of 8.22 percent over the last years. That is the point. You get a number that does not come from gut feeling, but from data. This can be uncomfortable, especially if you are emotionally convinced of a company. Numbers are often unromantic, but they are brutally honest. And honesty is a superpower, both in real life and on the stock market.

So far, so good. Now we come to a rule that I phrase quite sharply on purpose, because it protects you from typical beginner mistakes. In the manual fair value calculator there is a simple guardrail. The EPS you enter should roughly lie between 1 and 15, and Growth should be at least 1, preferably at least 3. The reasoning is simple. Personally I prefer to own shares of companies that make money and grow, instead of buying a story. If you enter values that almost never occur in real life or that are obviously prettified, you stop being an investor and become a speculator. At that point the simple fair value calculator reaches its limits. You can only sensibly project past values into the future if they are fairly stable and realistic. The more fantasy you put into the inputs, the more fantastic the output will be. That is perfectly logical.

Another point that surprises many first time users of the Fairvalue Calculator tools is this. Sometimes you will not find many stocks that are truly undervalued. The immediate thought is “does this even work”. Yes, it does. It may simply be the overall market that is expensive at that moment. If the broad market is overheated, you will naturally find fewer cheap stocks, because the broad market is made up of all these stocks. After crises, on the other hand, it is often much easier to find undervalued companies, because sentiment turns and prices fall much faster and further than the inner values and business figures.

That is why the Fairvalue Calculator does not stop at valuing individual stocks. It also includes a wider view of the overall market. If you want to understand how cheap or how hot the market currently is, you can use the market analysis. There you will find historical indicators and an assessment of the entire database. Major indices and the development of economic output are compared so that this virtual world of market prices is anchored again in the real economy. This is especially important in periods when low interest rates and euphoria push stock prices much further than the real development would justify.

The practical takeaway for you is this. The manual calculator is not meant to force you to do everything by hand forever. It is there so that you really understand the logic. Once you have a feeling for how EPS, growth, outliers and smoothing interact, you can either continue working manually or move on to the next level and use the automated tools that take over this work and make it much easier. What matters is that you never again look at a stock price in isolation, without at least roughly classifying the value behind it.