Value: Are You Paying a Fair Price?

The core question

Would you pay $800,000 for a house worth $400,000 just because it's in a nice neighborhood? Probably not. But people do the equivalent with stocks all the time — paying two or three times what a business is reasonably worth because it's exciting or trending. blue's Value score helps you spot when you're overpaying.

Price is what you pay. Value is what you get. The gap between them is your risk.

P/E ratio — what you pay per dollar of profit

P/E stands for Price-to-Earnings. If a company earns $1 per share and the stock trades at $25, the P/E is 25. You're paying $25 for every $1 of annual profit. Under 20 is generally reasonable for a mature business. Over 50 means you're betting heavily on future growth that hasn't happened yet. There's nothing wrong with paying up for growth — but you need to be confident that growth is actually coming.

PEG ratio — growth at a fair price

The PEG ratio solves a problem with P/E: a fast-growing company can justify a high P/E, so you need to compare the price to the growth rate. PEG divides the P/E by the earnings growth rate. Under 1.0 is a classic signal of a potential bargain — you're paying less than the growth rate justifies. Over 2.0 means you're paying a significant premium for growth that may or may not come. blue uses PEG as a key input in the Value score.

Buffett's principle: it's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

EV/EBITDA — the whole-business view

Enterprise Value divided by EBITDA. Think of it this way: if you bought the entire company — all the stock, all the debt — how many years of operating profit would it take to pay yourself back? Under 10x is generally cheap. Over 25x is expensive. This metric works across companies with different debt levels, making it useful for comparing businesses in the same industry.

A low Value score isn't always avoid

Some of the best businesses in the world score low on Value because everyone else already knows they're great, and the price reflects that. A low Value score means you're paying a premium — the growth story needs to be real and durable because you have less margin for error. Use the Value score alongside Quality and Growth to understand whether the premium is justified.