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Intrinsic Value Calculation
Intrinsic Value Calculation
Intrinsic value formula can help one to estimate ‘fair value’ of stocks.
But why to bother about ‘intrinsic value’? Why not simply buy stocks
at an available market price?
Because stocks will be profitable only if one buys them at a price below
its intrinsic value. In fact, Benjamin Graham (The Guru to Warren
Buffett) says that, stocks must be bought at a ‘discount‘ to its intrinsic
value.
Market price is the current price of a stock at which one can buy and
sell it. There is no partiality here. Even Warren Buffett has to buy
stocks in stock market at its ‘market price’, like us.
Calculator
CONCLUSION
Benjamin Graham’s intrinsic value formula is only a starting point of
stock valuation. It can only give a rough idea of the intrinsic value of
stock. But one must not base their decision on this formula alone.
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