# Reference Value (Expected Value)

The probability-weighted average of our simulated DCF values, shown beside the median and the base case.

## Definition

The Reference Value is our estimate of what a business is worth, calculated by the Standard Equity Valuation Model. We run the discounted cash flow model thousands of times with its main inputs varied, then average the results, with the discount rate held at our estimate (the interval lets it vary; the headline does not). That average, weighted by how likely each outcome is, is the expected value and the headline number. The median is the middle simulated value. The base case is the single run with every input at its estimate (the Damodaran method, deterministic). A few large outcomes lift the expected value above the median, and when the simulated values form two groups it can sit between them, where few outcomes land. We flag that case.

## Why it matters

A single number hides how much the answer depends on the inputs. Showing the three side by side tells you whether the headline rests on a few large outcomes. None of them has been tested against what stocks went on to do, so treat the value as a model's view, not a forecast.

## How Standard Equity uses it

Operating companies use a free-cash-flow-to-firm model, banks, capital markets firms and insurers an excess-return model on book value, and REITs a dividend model; all three report the expected value, median, base case and interval the same way. When the model is not meaningful for a company, the headline is the median of how the market prices its peers (for operating companies, with the price-to-earnings and EV/EBITDA multiples moved to the company's own growth) and is labelled an Indicated Value (peer multiples). Investment holding companies get no cash flow model: their value is in their stakes, so the headline is book value per share at the company's own 10-year median P/B, labelled an Indicated Value (own book multiple), and none without that history.

## The metric

| Category | Valuation |
| -------- | --------- |
| Unit     | $         |

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