One of the biggest mistakes investors can make during a bear market is to assume a stock that is down significantly is automatically a buy. The truth is, a lower stock price, higher cost of capital, and more uncertain operating environment combine to create a strong case for a lower intrinsic value estimate than investors were calculating in a rosier environment.

Consider Roku (ROKU 1.88%) and Shopify (SHOP 1.61%). The two growth stocks are both down nearly 80% over the past year. But their lower prices do not automatically mean shares are bound to rebound sharply. Indeed, for many growth stocks, a significantly lower stock price should lead to a materially lower intrinsic value estimate from investors.

Here are three ways the current operating environment has shifted some tangible factors investors should be considering in their estimate of a stock's value.

Equity is worth significantly less

This first point is the one that is especially relevant to growth stocks. With many of these fast-growing companies' shares both (a) experiencing a significant decline in their stock price over the past year and (b) paying out substantial sums of stock-based compensation, huge stock-price cuts can have massively negative effects on their operating environments.

First, there's much greater dilution required now to raise capital compared to when these companies' stocks were trading much higher. Case in point, when Roku raised $1 billion in March of 2021, it only required just over 2% dilution to shareholders. But for Roku to raise $1 billion through an equity sale today, shareholders would have to be diluted by about 10% at the current stock price.

Then there's the impact of a lower stock price on stock-based compensation. Many tech companies -- Roku and Shopify included -- pay a substantial portion of their salary expenses in stock-based compensation. With a much lower stock price, more dilution may be required in new salary agreements in order for employees to feel like they are compensated as attractively as when shares were worth more.

Debt costs more

Then, of course, there's the simple fact that recent interest rate hikes from the Fed increase the cost of debt capital for companies. So if tech companies like Shopify and Roku turn to the debt market to raise capital because they don't want to dilute shareholders, they'd need to pay up a higher interest rate than they would have a year ago.

Cash is more valuable during uncertain times

Finally, during an uncertain macro environment, a strong balance sheet becomes a powerful tool for giving companies optionality. For instance, a company with both an excess cash balance and strong cash flows from operations may be in a good position to repurchase shares when its stock price is tanking, providing substantial value to shareholders assuming the stock eventually rebounds. Further, companies like this wouldn't need to rely on stock-based compensation as a significant salary component during a time that it leads to greater dilution.

How well-positioned are Roku and Shopify? While both Roku and Shopify have billions of dollars of cash on their balance sheets, Roku didn't even generate positive free cash flow for its trailing-12-month reported period and Shopify's trailing-12-month free cash flow of $108 million pales in comparison to its $42 billion market capitalization. The two companies, therefore, do not have as much optionality as some cash cows. This is unfortunate during a period in which cash is particularly valuable for share repurchases or even acquisitions since some companies can likely be acquired at lower prices during markets like this.

None of this is to make the argument that Roku and Shopify stocks are not good buys today. The main point of this article is to remind investors that there are times when a significantly lower stock price and a more uncertain operating environment has a substantially negative impact on a company's intrinsic value. Of course, the degree of these stocks' recent drops may have more than compensated for this heightened risk. Still, investors should carefully consider the evolving landscape when deciding whether a stock is more attractive after shares have been slashed during a bear market.

Of course, there's another takeaway here as well. It's times like these when companies with a history of not diluting shareholders by raising equity and paying out significant sums of stock-based compensation shine. The optionality available to companies able to fund their growth from their own cash flow, and with management teams adept at putting their cash to work in value-creation activities, becomes paramount in difficult operating environments. So if you're looking for ways to invest some capital as fear is the dominating emotion in the market, don't just look to the beat-up tech stocks. Consider adding some cash cows with great management teams, too.