What is Intrinsic Value?

Intrinsic Value is Subjective Depending on the Investor’s Analysis

Intrinsic Value much like Market Value is used by investors and financial analysts to measure the worth of an asset. To be honest, intrinsic value is really a blanket term since there are various techniques used to determine whether a stock price reflects the value of a company. 

Investors and analysts will take into consideration Free Cash Flow(FCF) and the company’s Business Outlook along with projected revenue growth rates when trying to determine the intrinsic value.  

It Varies but What Do You or Others Think the Stock is Worth?

It all boils down to what an investor or analyst really thinks a company is worth and there is no golden formula due to its subjectivity. When determining intrinsic value, investors place emphasis on the present value of expected future cash flows.  

For example, an equity analyst might use the Dividend Discount Model (DDM) to conclude a stock is worth $115 a share when its open market value (share price) sees it at only $90 a share. 

Again this is strictly through the eyes of one analyst but if you feel confident about your research, it might be worth grabbing a few shares and holding on over the long-term. Intrinsic value is simply the value of a business based on your opinions and likely varies from the market and other investors.