Intrinsic Value Calculator
Calculate the intrinsic value of a stock using Discounted Cash Flow (DCF) analysis. This fundamental valuation method determines the true worth of a company based on its future cash flows.
Cash Flow & Growth
Current Market Data
Intrinsic Value Results
Intrinsic Value per Share:
$0.00
Current Market Price:
$0.00
Valuation Status:
N/A
Investment Analysis
Upside Potential:
0.00%
Margin of Safety:
0.00%
Investment Rating:
N/A
Business Insights
Fair Value Range:
N/A
DCF Reliability:
N/A
Key Assumptions:
N/A
Understanding Intrinsic Value
Intrinsic value is the actual worth of a company based on fundamental analysis of its financial performance and future cash flows. Unlike market price, which can be influenced by speculation and sentiment, intrinsic value represents the true economic value of the business.
DCF Valuation Method
Discounted Cash Flow
- Projects future free cash flows
- Discounts to present value
- Adds terminal value
- Divides by shares outstanding
Key Components
- Free Cash Flow (FCF)
- Growth rate assumptions
- Discount rate (WACC)
- Terminal growth rate
Why Intrinsic Value Matters
Value Investing Foundation
The cornerstone of fundamental analysis
Margin of Safety
- Buy when market price < intrinsic value
- Provides downside protection
- Quantifies investment risk
- Benjamin Graham's key principle
Long-term Focus
- Ignores short-term market fluctuations
- Focuses on business fundamentals
- Compound growth over time
- Reduces emotional decision making
DCF Assumptions and Risks
Growth Rate Assumptions
- Historical growth may not continue
- Competitive pressures
- Market saturation
- Economic conditions
Discount Rate Risks
- WACC calculation complexity
- Interest rate changes
- Company-specific risk
- Market risk premium
Terminal Value Methods
| Method | Formula | Advantages | Limitations |
|---|---|---|---|
| Gordon Growth | TV = FCF × (1-g) / (r-g) | Simple, widely used | Assumes constant growth |
| Exit Multiple | TV = FCF × Multiple | Market-based approach | Subject to market conditions |
| Liquidation Value | TV = Asset Value - Liabilities | Conservative estimate | May undervalue going concern |
Sensitivity Analysis
Key Variables
- Growth rate changes
- Discount rate variations
- Terminal growth assumptions
- FCF estimation errors
Scenario Planning
- Best case / worst case
- Probability weighting
- Range of fair values
- Risk-adjusted valuations
Intrinsic Value vs Market Price
Market Price Drivers
- Supply and demand
- Investor sentiment
- Market psychology
- Short-term news
Intrinsic Value Drivers
- Company fundamentals
- Economic moat
- Management quality
- Long-term cash flows
Common DCF Mistakes
Overly Optimistic Assumptions
- Unrealistic growth rates
- Ignoring competition
- Overestimating market share
- Too low discount rates
Technical Errors
- Incorrect FCF calculation
- Wrong WACC formula
- Improper terminal value
- Circular references
Key Takeaways for Intrinsic Value
- Intrinsic value is the actual worth of a company based on its fundamentals and future cash flows
- DCF analysis calculates intrinsic value by discounting future free cash flows to present value
- When market price is below intrinsic value, the stock may be undervalued
- DCF models are highly sensitive to assumptions about growth rates and discount rates
- Intrinsic value provides a margin of safety for value investors
- Should be used alongside other valuation methods for comprehensive analysis
- Regularly update DCF models as new information becomes available
- Consider scenario analysis to understand valuation range and risks