Intrinsic Value Calculator
The Famous Intrinsic Value calculation written by Benjamin Graham. The Intrinsic Value formula is also know as the “Benjamin Graham” formula. Benjamin Graham’s wrote the book “The Intelligent Investor” first published in 1949. The Intelligent Investor is a famous book among Value Investors. Value Investors have been using The Intrinsic Value calculation since Benjamin Graham. Intrinsic Value Template This intrinsic value template will demonstrate the calculation of intrinsic value using the discount rate method and the certainty factor method. Below is a screenshot of the intrinsic value template: Download the Free Template. Warren Buffett Intrinsic Value =C. ( 1 - ( 1 / ( Discount / 100 + 1 ) year) ) / ( Discount / 100 ) + CBV. ( Percentage Change + 1) year / ( Discount / 100 + 1 ) year Where, C= Cash taken out of Buisness Percentage Change = Average Percent Change in book value per year / 100 CBV = Current Book Value.
Our mission is to help people not to lose money in the Overvalued Stock Market Bubble.
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There are more than one way to calculate Intrinsic Value. Each method used will give you different result. The best way to find out an Intrinsic Value is to use few different methods for calculation and analyze the results.
This Intrinsic Value Calculator is based on Warren Buffett's 'Ten Cap Price' otherwise known as 'Owner Earnings'. Warren Buffett is calling Owner Earnings the most 'relevant item for valuation purposes - both for investors in buying stocks and for managers in buying entire businesses.'
Per Warren Buffett's Value Investment Theory the buy decision should be based on several factors:
1. Company must have competitive advantage...
2. Company performed admirably in the past 10 years, recovered after market correction(s) and recession(s)...
3. Company must have long term prospects - be relevant in 10 years from now...
4. Company's market price should be 20-30% less than calculated intrinsic value - margin of safety price.
The logical question we would ask, is it possible for such a good company to have the market price 20-30% bellow intrinsic value? The answer is: YES! It is possible due to various reasons. Some of the reasons are: bad news about the company, company's industry is out of market favor, market is in correction or recession...
YES, Recession! You can read about our 2019 market analyses by clicking on DIY icon on the bottom of this window. All statistical data show that we are in the next Market Bubble similar to 'DOT-COM Bubble' of 2001 and 'Housing Bubble' of 2008. It is just a matter of time before current Market Bubble is popped presenting an opportunity for Value Investors to buy their favorite stocks for less than intrinsic value! But in order to buy your favorite stocks for less than intrinsic value you need to know what intrinsic value is. This is when our Intrinsic Value Calculator comes handy. You can calculate, store, reload and compare intrinsic value with market price anywhere and anytime, and all you need is your phone and our application.
You can read more about Value Investing online. We would really recommend - 'The Intelligent Investor' by Benjamin Graham - Warren Baffett's favorite teacher and the founder of Value Investment Theory.
The goal of this application is to help investors not only to calculate intrinsic value but also to understand meaning of values and easy way of locating them. Most of the values required for calculation could be found on company's latest annual report. Annual reports can be found on company’s website in investor relations section. Values missing in annual report could be found on GOOGLE.
Each edit field has a corresponding help button to explain the meaning and location of the data on Company's annual report.
'Examples' button would display actual values for Bank of America and all FAANG stocks: Facebook, Apple, Amazon, Netflix and Alphabet’s Google.
To see the result of updated comparison of market price to the intrinsic value you would need to update current market price.
'Save Data' button would save data to your phone storage at 'IntrinsicValueData' folder as comma separated .CSV file.
'Load Saved Data' button would display list of files .CSV saved at 'IntrinsicValueData' folder.
'.CSV' files in 'IntrinsicValueData' folder could be copied to PC and loaded to MSExcel for further analyses.
'.CSV' files modified on MS Excel can be copied back to 'IntrinsicValueData' folder. Try to keep the same format to avoid breaking Intrinsic Value Calculator.
Intrinsic Value
To calculate Intrinsic Value based on Owner Earnings you have to add several numbers found on company's Annual Report: '
1. Net Income
2. Depreciation and Amortization
3. Net Change Accounts Receivable
4. Maintenance Capital Expenditures (should be negative number)
5. Income Tax
Multiply result by 10 and divide by number of shares.
This method doesn’t take growth into account.
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You have found a good business with a high , low debt levels, healthy profit margins and a steadily increasing book value? Great, then it is now time to calculate the company's to determine whether the stock price is low enough to invest!
The following quote provides a definition of the term intrinsic value.
Warren Buffett Intrinsic Value Calculator Excel
'[Intrinsic value is] the discounted value of the cash that can be taken out of a business during its remaining life.'
in Berkshire Hathaway Owner ManualSo the intrinsic value is the net present value () of the sum of all future free cash flows () the company will generate during its existence. This intrinsic value reflects how much the business underlying the stock is actually worth if you would sell off the whole business and all of its .
Value investors make money by buying good businesses at a price way below the intrinsic value.
The idea behind this is that in the short term the market often produces irrational prices, but in the long term the market will on average price the stocks correctly. So if you buy when the price is irrationally low and sell when the price approaches the intrinsic value (the correct price), you will earn market beating returns while taking less risk!
Discounted Cash Flow method
To calculate the intrinsic value of a stock using the discounted cash flow method, you will have to do the following:
- Take the free cash flow of year 1 and multiply it with the expected growth rate
- Then calculate the NPV of these cash flows by dividing it by the
- Project the cash flows 10 years into the future and repeat steps 1 and 2 for all these years
- Add up all the NPV's of the free cash flows
- Multiply the 10th year with 12 to get the sell off value*
- Add up the values from steps 4, 5, and Cash & Cash Equivalents to arrive at the intrinsic value for the entire company
- Simply divide this number with the number of to arrive at the intrinsic value per share
Is the current stock price much lower than the intrinsic value per share you calculated? Then you might consider investing.
However, take into account that the intrinsic value you calculated is merely an estimate, and that small changes in inputs can lead to significant changes in the estimate. So do not take the calculated value as true, but merely as a rough indication.
* For this calculation we assume that the company and all its assets will be sold in year 10 at a free cash flow multiple of between 12 and 15. This is because it is impossible to predict the future, especially more than 10 years ahead.
Free Discounted Cash Flow calculator
To make life a bit easier for you, I created an automated discounted cash flow spreadsheet which you can use to quickly calculate the intrinsic value of US listed companies.
And the best thing is that all you have to do is fill in the ticker symbol and the spreadsheet will do the rest!
Sounds good? Then click the button below to get access!
Other valuation models
While DCF is one of the most common ways to calculate the intrinsic value of a company, there are other good methods available that can help you get a more accurate picture.
Since calculating the intrinsic value of a company is more art than science (you just can't precisely determine the value, it is always an estimate), it is recommended to use multiple methods and then compare the results.
![Definition intrinsic value options Definition intrinsic value options](/uploads/1/1/7/6/117652724/415531840.png)
Read my Easy Intrinsic Value Formula post for a method which is based on instead of FCF, for example.
For a comprehensive explanation of 3 distinct valuation models, leave your name and email below to receive my free How to Value Stocks ebook.
Advanced intrinsic value calculations
If you want more advanced functionalities, you might consider my PREMIUM value investing spreadsheet
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