Share Predictions
Intrinsic value calculator
Estimate what a share is worth and compare it with the market price.
For profitable companies with steady earnings growth.
Intrinsic value per share
$163.02
Price close to this value- Margin of safety
- 8.0%
- Value above price
- +$13.02
- Implied P/E
- 25.1x
- Value of projected cash flow
- -
- Terminal value today
- -
Value at other rates
| Growth / yield |
|---|
The marked cell is the numbers you entered.
How intrinsic value works
Intrinsic value estimates what a share is worth from the earnings or cash it is expected to produce, whatever the market charges for it today. The gap between that value and the price is the margin of safety.
Graham: V = EPS x (8.5 + 2g) x (4.4 / Y)
Margin of safety = (Value - Price) / Value
An example
A stock earns $6.50 a share and is expected to grow 10% a year, with AAA bonds yielding 5%. The Graham formula gives 6.50 x (8.5 + 20) x (4.4 / 5) = $163.02. At a $150 price, the margin of safety is 8%.
Questions
What is the intrinsic value of a stock?
An estimate of what a share is worth based on the business's earnings, cash flow and growth, apart from its market price. Different assumptions give different values, so it is always an estimate.
How do you calculate intrinsic value with DCF?
Project free cash flow per share for 5 to 10 years, add a terminal value for the years after, discount everything to today at a rate such as 10%, and add it up.
What is Benjamin Graham's intrinsic value formula?
V = EPS x (8.5 + 2g) x (4.4 / Y). EPS is earnings per share, g the expected growth rate, 8.5 the P/E for a company with no growth, and Y the current AAA corporate bond yield. 4.4 was the bond yield when Graham published it.
What is a good margin of safety?
Many value investors look for 20% to 30%. If you put a stock's value at $100, that means buying at $70 to $80, which leaves room for errors in the estimate.
What discount rate should I use for DCF?
Many analysts use the company's weighted average cost of capital (WACC), often 8% to 12%, and 10% is a common starting point. Riskier companies call for a higher rate.
How much can a DCF result change?
A lot. Small changes in growth or the discount rate move the value widely, and most of the value usually sits in the terminal value. Use the sensitivity table to see the range.
What is the difference between intrinsic value and book value?
Book value is an accounting figure: assets minus liabilities. Intrinsic value looks forward, to what the business is expected to earn, so it also counts brands, patents and growth.
How do I calculate intrinsic value in Excel?
For the Graham formula: =EPS*(8.5+2*Growth)*(4.4/Yield). For a DCF: =NPV(Rate,FCF1:FCF5)+TerminalValue/(1+Rate)^5.
Related tools
For education only, not financial advice. Results depend on the numbers you enter.