Intrinsic Value Calculator

What Is an Intrinsic Value Calculator?

An Intrinsic Value Calculator is a financial tool that helps estimate what a company's stock may be worth based on its expected future cash flows rather than only its current market price.

Investors can use a stock intrinsic value calculator to compare an estimated fair value with the current share price. This can provide another perspective when researching a company and evaluating its valuation.

How to Calculate Intrinsic Value of Shares?

One commonly used approach is the Discounted Cash Flow (DCF) method. The basic idea is to estimate the company's future free cash flows and convert those future amounts into their value today using a discount rate.

After estimating the present value of future cash flows and the terminal value, the estimated business value can be divided by the number of shares outstanding to calculate an estimated intrinsic value per share.

How This Intrinsic Value Calculator Works

This calculator uses a simplified DCF model. You enter the current share price, free cash flow, expected growth rate, discount rate, long-term growth rate and total shares outstanding.

Why Compare Intrinsic Value With Market Price?

The market price of a stock represents the price at which shares are currently being traded. Intrinsic value is an estimate based on financial assumptions and expected future cash flows.

Comparing these two figures can help investors understand whether a stock's current market price is above or below the value estimated by their chosen assumptions.

Example of Stock Intrinsic Value Calculation

Suppose a company has free cash flow of ₹100 crore and 10 crore shares outstanding. If an investor assumes future cash-flow growth, applies a discount rate and estimates a long-term growth rate, the DCF model can produce an estimated company value.

Dividing that estimated value by 10 crore shares gives an estimated intrinsic value per share. The result can then be compared with the stock's current market price.

Important Factors That Affect Intrinsic Value

• Free Cash Flow: Higher sustainable cash flow can increase estimated value.
• Growth Rate: Higher assumed growth can increase future cash flows.
• Discount Rate: A higher discount rate generally reduces the present value of future cash flows.
• Terminal Growth: The long-term growth assumption can have a significant effect on terminal value.
• Shares Outstanding: Estimated company value is divided by shares to obtain the per-share value.