Investing term

What is Intrinsic value?

What a business is worth based on the cash it can produce, independent of today's market price.

Intrinsic value is what a business is genuinely worth based on the cash it can generate over its life, independent of today's market price. Investors estimate it to judge whether a stock is cheap or expensive — buying when price sits well below intrinsic value and the gap offers a margin of safety. It's an estimate, not a precise figure, so honest investors think in ranges.

For example

You estimate a company is worth about $80 a share; with the stock at $55, the market is offering it well below your view of intrinsic value.

Intrinsic value is taught hands-on in Stage 15 — Valuation for Investors.

See the lesson →

Related terms

Book valueTotal assets minus total liabilities — the accounting net worth of the business.DCF (discounted cash flow)Estimate intrinsic value by adding up the present value of every future cash flow the business produces.Discount rateThe annual rate used to translate future dollars back into today's dollars in a DCF.Dividend yieldAnnual dividend per share ÷ share price. The cash income the stock pays out as a percentage of price.
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