Intrinsic value calculator


Intrinsic value calculator helps you to find a perfect stock you are researching. It only needs three inputs means the stock you are examining its current market price, the risk-free interest rate and the stock’s earnings per share estimate.

Three main points in the intrinsic value calculator are as follows:

  1. Current Stock Market Price

This is the value of the current market price of a stock you are inspecting.

  1. Earnings Per Share

An estimate of future earnings or historical earnings is stocked earning per share. If you are inspecting the historical performance, you should be using earnings as given by the company in the past. For calculating the intrinsic value on investment you have to use earnings estimate.

  1. Risk-Free Interest Rate

In risk-free interest rate the investments have a guaranteed return, for a one-year Treasury bill, most stock analysts use interest rate as a proxy for the risk-free rate of interest.

What is the intrinsic value?

The intrinsic value of an option is determined differently depending on whether it is a put option or a call option.

In money put options the intrinsic value is calculated by subtracting the price of the underlying asset from strike price and in money call options the intrinsic value is calculated by subtracting strike price from a price of underlying asset.


Return On Investment (ROI)

It measures the loss or gain generated in an investment which is relative to the amount of money invested. It is a profitability ratio which is most common, and by dividing net profit by total assets we can calculate return on investment, this is the most frequent method for calculation.

Intrinsic Value Calculator Description

The interpretation of the business by translating them into a price valuation and fundamentals of a company is known as intrinsic valuation. The estimation of intrinsic values is a special skill and on the internet, these values are less published.

Intrinsic value calculator plays an important role in finance, the stocks and companies are valued in terms of different values. Only studying market and predictions by the past stock values is not sufficient to invest in any stock because by that you cannot get a perfect figure and the intrinsic value calculator helps to calculate the values which are much more useful.

If you are able to calculate the intrinsic value of your stock then you know the actual and true value of your stock than the recent value of the market.

Intrinsic values help to calculate values of securities, options and real estate. Similarly, in real estate the calculation of intrinsic values is by the net present value of future cash when the property was given at rent could be generated.

An estimate of a true value of a stock is the intrinsic value of a stock, true value stands for the right price of a stock to be paid for. When you are investing in stock you need to be careful for where you are investing like a selection of right stock and what the right price for that stock is. In the stock market, there are lots of bad qualities of stocks so it is your task to find the good one.

Some stocks are overvalued and some are undervalued. For the intrinsic valuation, some methods are simple and straightforward.

The formula for calculating the intrinsic value by Graham

Graham formula

Benjamin Graham gave us a simple formula in his words, but the formula revised in 1974 and as follows

V* = EPS x (8.5 + 2g) x (4.4 / Y)

  • Here V* is the intrinsic value of stock
  • EPS is the last 12 months earnings per share of a company
  • 8.5 is constant representing the P/E ratio
  • G is long term earnings growth of the company
  • Y is the current yield on AAA corporate bonds

Only investing is not enough therefore it is important to know some safety margins.

Margin of safety

An investor must know the factor of safety because a highly skilled person can calculate intrinsic value accurately. But what is for a less skilled person? He cannot value stocks accurately. For investing everyone should maintain safety. In this rule, it says that an investor should buy only 2/3rd of intrinsic value share.


Limitations of Graham’s formula

The main problem with Graham’s formula is 4.4 is the yield in a corporate bond of America. So in India, it might not be so relevant. Today in India yielding close to 7% per annum and in America, it is closing at 3.5% per annum, so it has a major difference. But when the formula was given, that time corporate bonds were yielding at 4.4% per annum. So we cannot go through the formula.


Here you have to admit that the stock valuation is not an easy job and also time-consuming and it needs a lot of patience and work. When you start investing in stocks you will take a big time at the valuation process because there are many steps to find out the real value of a single stock.

Presently there are thousands of companies in the stock market for finding the right stock to invest. You have to evaluate many of them. But with the help of intrinsic value calculator, this hard work can be a little easy and that’s why only this valuation is used. This calculator’s use is very simple you just have to need some information and it will do everything for you. This tool will help you to find the right value of undervalued stocks.

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