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Valuation Is a Range, Not a Number

advanced6 min read

Anyone quoting one exact fair value is fooling themselves. Think in scenarios.

After all the formulas, hold this lightly: nobody can compute a single, exact “fair valueWhat an asset is really worth, based on its fundamentals.” for a business. The futureA binding agreement to buy or sell at a set price on a future date. is unknowable, and small assumption changes move the answer a lot (as the DCF showed). Honest valuationEstimating what an asset is worth. produces a range, not a point.

The pros don’t say “this is worth ₹1,500.” They say “it’s worth roughly ₹1,200–₹1,800 depending on how growth plays out — so at ₹950 it’s clearly cheap, and at ₹2,200 clearly expensive.” You don’t need precision; you need to know whether today’s price is comfortably inside, below, or above the range. That’s a decision you can actually make.

This is liberating: you can be a successful investor without ever pinning an exact number. You only need to recognise the obvious bargains and obvious excesses, and skip everything in between (“too hard”).

Key takeawayValuationEstimating what an asset is worth. is a fuzzy range, not a precise number. Aim to tell cheap from expensive with a margin of safetyBuying well below your estimate of value to allow for being wrong. — not to compute an exact fair valueWhat an asset is really worth, based on its fundamentals..
FAQs
If I can’t value a company precisely, how do I decide?

You don’t need precision — you need a clear verdict of “cheap”, “expensive”, or “too hard to tell”. Act only on the clear cases, demand a margin of safety, and pass on anything ambiguous. Most great investing is patiently waiting for obvious bargains.