Intrinsic Value Calculator

Intrinsic value is the underlying worth of a business based on its fundamentals: earnings, cash flow, assets, and growth prospects. It is what a rational investor would pay for the entire business if they could buy it outright. The market price is what people are paying for it right now, which can be very different. The gap between intrinsic value and market price is the opportunity that value investors hunt for.

Every valuation model has assumptions and blind spots. The Graham Number is conservative and works for stable businesses but underestimates growth companies. P/E multiples are simple but ignore capital structure. EV/EBITDA handles debt better but ignores capex intensity. DCF is theoretically sound but very sensitive to terminal value assumptions. Using all of them produces a range. If most models converge, your estimate is more robust. If they diverge wildly, that itself is information about the company's uncertainty.

The Graham Number is a conservative floor for intrinsic value developed by Benjamin Graham. The formula is the square root of 22.5 multiplied by earnings per share multiplied by book value per share. The 22.5 comes from Graham's belief that fair value sits where the product of P/E and P/B does not exceed 22.5 (e.g., P/E of 15 times P/B of 1.5). It works best for stable, asset-heavy, profitable businesses. It systematically underestimates asset-light growth companies like software.

Graham later revised his approach to incorporate growth: V = EPS times (8.5 plus 2 times growth rate) times 4.4 divided by current AAA corporate bond yield. The 8.5 represents the base multiple for a no-growth company, 2 scales growth contribution, and 4.4 adjusts for the bond yield baseline. This formula is more forward-looking than the Graham Number but still rooted in earnings.

P/E multiples work well for mature, profitable companies in stable industries where peer comparison is meaningful. Apply a fair P/E based on the company's historical average, industry median, or growth-adjusted PEG ratio. P/E breaks down for unprofitable companies, cyclical companies at peaks or troughs, and businesses with major non-cash earnings distortions like heavy depreciation.

EV/EBITDA strips out the effects of capital structure (debt versus equity) and accounting choices (depreciation, taxes). It is especially useful for comparing companies with different debt loads, capital-intensive industries like telecom or utilities, and acquisition analysis where buyers think in EV terms. It does not capture differences in capex intensity, so use with caution for capital-light versus capital-heavy comparisons.

DCF projects future cash flows year by year, discounts them back to present value, and adds a terminal value to capture cash flows beyond the forecast horizon. It is the most theoretically complete model and the only one that explicitly accounts for time, growth duration, and reinvestment. The trade-off is sensitivity. Small changes in growth rate, discount rate, or terminal assumptions produce big swings in output. Most institutional analysts run DCF as a sanity check alongside multiples, not as a standalone answer.

None of them. Trust the convergence. If 4 of 5 models cluster within a narrow band, you have a reasonable estimate. If they spread widely, the company has fundamental uncertainty (high growth, distressed, transitional) and no single model captures it. Use the composite as a midpoint, the lowest model as a conservative floor, and the highest as a bullish ceiling. Make sure you have a margin of safety against the conservative floor before buying.