Intrinsic Value Calculator
Calculate stock intrinsic value using Benjamin Graham's formula with earnings per share and growth rate
Calculate Intrinsic Value
Benjamin Graham Formula
Trailing twelve months (TTM) earnings per share
Expected growth rate for the next 7-10 years
Current AAA corporate bond yield (US: ~4.22%)
Current market price to calculate margin of safety
Intrinsic Value Results
Example Calculation
ABC Corp Example
Company: ABC Corp
Earnings Per Share: $23.00
Expected Growth Rate: 10% annually
AAA Corporate Bond Yield: 3.7%
Current Market Price: $500.00
Intrinsic Value Calculation
V = EPS × (8.5 + 2g) × 4.4 / Y
V = 23 × (8.5 + 2 × 10) × 4.4 / 3.7
V = 23 × 28.5 × 4.4 / 3.7
V = 23 × 28.5 × 1.189
V = $779.51
Margin of Safety: (779.51 - 500) / 779.51 = 35.86%
Recommendation: Buy - Good margin of safety
Margin of Safety Guide
Strong Buy
Excellent margin of safety
Buy
Good margin of safety
Fair Value
Stock is fairly priced
Overvalued
Consider waiting for better price
Value Investing Tips
Use conservative growth rate estimates
Consider multiple valuation methods
Focus on companies with consistent earnings
Maintain a margin of safety of 20% or more
Review fundamentals beyond just price
Use trailing twelve months (TTM) data
Understanding Intrinsic Value
What is Intrinsic Value?
Intrinsic value represents the true worth of a stock based on its fundamental characteristics, independent of its current market price. Benjamin Graham developed this concept to help investors identify undervalued securities for long-term investment.
Benjamin Graham's Approach
- •Based on earnings capacity and growth potential
- •Uses conservative P/E ratio assumptions
- •Incorporates expected growth rates
- •Adjusts for current interest rate environment
Formula Components
V = EPS × (8.5 + 2g) × 4.4 / Y
- V: Intrinsic value per share
- EPS: Earnings per share (TTM)
- 8.5: P/E ratio for zero-growth stock
- g: Expected annual growth rate (%)
- 4.4: Risk-free rate in 1962 (constant)
- Y: Current AAA corporate bond yield
Note: The revised formula adjusts for changing interest rates, making it more applicable to current market conditions.
Margin of Safety Explained
The margin of safety is the percentage difference between the intrinsic value and current market price. It represents your cushion against errors in estimation and market volatility.
MS = (V - CMP) / V × 100%
Where MS = Margin of Safety, CMP = Current Market Price