Intrinsic Value Calculator

Intrinsic value is what a business is truly worth based on the cash it will generate — not what the market currently prices it at. When the market price falls significantly below intrinsic value, you have a potential buy opportunity with a built-in margin of safety.

What is intrinsic value?

Intrinsic value is the fundamental worth of a business, derived from its ability to generate future cash flows. Unlike market price — which reflects supply, demand, sentiment, and momentum — intrinsic value is anchored in the economics of the business itself.

The key insight of value investing: when market price is significantly below intrinsic value, you are buying a dollar of future earnings for less than a dollar today. Benjamin Graham called this gap the margin of safety — a buffer against errors in your assumptions and unpredictable events.

How to calculate intrinsic value — 4 methods

1. Discounted Cash Flow (DCF) — most rigorous

DCF is the gold standard for intrinsic value calculation. It projects a company's free cash flow forward 10 years, discounts each year's cash flow back to present value using WACC, adds a terminal value, subtracts net debt, and divides by shares outstanding.

2. Graham Number — for value stocks

Benjamin Graham's formula provides a quick intrinsic value ceiling, particularly useful for traditional value stocks in financial and industrial sectors.

3. Earnings Power Value (EPV)

EPV values a company based on its current, normalized earnings — with no growth assumed. It represents a conservative floor value: what the business is worth if it never grows again.

4. Asset-based valuation

For companies whose value lies primarily in what they own rather than what they earn, asset-based valuation calculates intrinsic value as the net asset value (NAV) — total assets minus total liabilities, adjusted to market value.

Best for: holding companies, real estate investment trusts (REITs), banks, and natural resource companies.

What inputs do you need for an intrinsic value calculator?

Common mistakes when calculating intrinsic value

Using too high a growth rate

The single biggest error in intrinsic value calculations. Assuming 25–30% annual growth indefinitely produces trillion-dollar valuations for mid-cap companies. Cap near-term growth at 30% and let it mean-revert to industry averages by years 6–10.

Ignoring terminal value sensitivity

Terminal value typically represents 60–80% of total intrinsic value. A 0.5% change in the terminal growth rate can move your output by 15–25%. Always stress-test with multiple terminal growth assumptions (1.5%, 2.5%, 3.5%).

Not running multiple scenarios

A single-point DCF estimate creates false precision. Professional analysts run Bear, Base, and Bull scenarios to show the range of reasonable outcomes — giving a distribution of intrinsic values rather than a single number.

Treating the output as precise, not a range

Intrinsic value is an estimate, not a fact. A well-built model produces a range — perhaps $85–$130 per share — not a single number like $107.43. If you're buying at $80, you have margin of safety across the full range. If you're buying at $120, you're only safe in the bull case.

How pocketDCF calculates intrinsic value

pocketDCF runs an institutional-grade 10-year, 3-stage DCF model automatically, pulling real financial data directly from regulatory filings.

• 10-year 3-stage DCF model: High growth (years 1–5), transition (years 6–8), mature growth (years 9–10) — with hyper-growth capped at 30%
• Blended with sector multiples: P/FCF for technology, EV/EBITDA for energy, P/Book for banks — weighted by FCF predictability
• Bear/Base/Bull scenarios: Statistical spread across pessimistic, expected, and optimistic growth trajectories
• AI risk scoring: Qualitative risk overlay on the quantitative DCF — flagging leverage, moat strength, and sector headwinds