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Free alpha and beta calculator. Measure your portfolio's market sensitivity (beta) and excess risk-adjusted return (alpha) against a benchmark index.
Intrinsic Value Calculator
Estimate a stock's intrinsic value using DCF, Dividend Discount Model, and Graham formulas. Includes margin of safety, sensitivity table, and multi-model comparison.
For DDM model
For Graham Number
Intrinsic Valueโง
$106.50
Model: Discounted Earnings
Margin of Safetyโง
20.2%
โ
Undervalued
Upside/Downsideโง
+25.3%
From current price of $85
Price/Intrinsicโง
0.80ร
Below 1.0 may indicate undervaluation
DCF Valueโง
$106.50
Terminal PV: $61.24
DDM Valueโง
$36.79
Gordon Growth Model
Price vs Intrinsic Value
Price
$85.00
Intrinsic
$106.50
Sensitivity Table (Discount Rate ร Growth Rate)
| DR \ GR | 6% | 7% | 8% | 9% | 10% |
|---|---|---|---|---|---|
| 8% | $131 | $141 | $153 | $166 | $179 |
| 9% | $108 | $117 | $126 | $136 | $147 |
| 10% | $92 | $99 | $107 | $115 | $124 |
| 11% | $80 | $86 | $92 | $99 | $106 |
| 12% | $70 | $75 | $81 | $87 | $93 |
Planning notes, formulas, and examples
About the Intrinsic Value Calculator
Intrinsic value is the estimated true worth of a stock based on its fundamentals โ earnings, growth, dividends, and assets โ independent of its current market price. Comparing intrinsic value to market price is the foundation of value investing, as popularized by Benjamin Graham and Warren Buffett.
This calculator offers four valuation models: Discounted Earnings (a simplified DCF), the Dividend Discount Model (Gordon Growth), the Graham Formula, and the Graham Number. Each model approaches valuation from a different angle, and comparing results across models provides a more robust estimate than relying on any single method.
The margin of safety โ the gap between intrinsic value and current price โ is your cushion against estimation errors. A margin above 20-30% is generally recommended. The sensitivity table shows how changes in discount rate and growth rate assumptions affect the valuation, revealing which assumptions matter most. Use it to test how much the estimate moves when growth or discount assumptions change.
When This Page Helps
Use this when you want a disciplined estimate of what a business is worth before buying shares or setting a target price. It helps compare optimistic and conservative assumptions, and it makes the margin of safety explicit so you can judge whether the stock price already reflects the business's fundamentals.
How to Use the Inputs
- Select a valuation model (DCF, DDM, Graham, or Graham Number).
- Enter the current EPS and expected growth rate.
- Set your required rate of return (discount rate).
- Add terminal growth rate and projection period for DCF.
- Enter the current stock price to see margin of safety.
- Check the sensitivity table to assess how assumption changes affect the value.
Formula used
DCF = ฮฃ(EPS ร (1+g)^t / (1+r)^t) + Terminal Value / (1+r)^n
DDM = Dโ / (r โ g) where Dโ = current dividend ร (1+g)
Graham = EPS ร (8.5 + 2g) ร 4.4/Y
Graham Number = โ(22.5 ร EPS ร Book Value)Example Calculation
Result: Intrinsic Value โ $115
Projecting $5 EPS growing at 8% for 10 years, discounted at 10% with 3% terminal growth, yields an intrinsic value of approximately $115. At a stock price of $85, that's a 26% margin of safety.
Tips & Best Practices
- Compare all four models โ if they cluster around a similar value, your estimate is more robust.
- Be conservative with growth rate assumptions โ reversion to the mean is powerful.
- Terminal value often accounts for 50-70% of DCF value โ make sure terminal growth is reasonable.
- Use the sensitivity table to find the "break-even" assumptions that justify the current price.
- Update your intrinsic value estimate quarterly when new earnings data is released.
How the Models Differ
Discounted earnings is the most direct forecast-based approach, while DDM is best for companies that return cash through dividends. The Graham methods are more conservative and work as a quick valuation check when you want a second opinion on the result.
Interpreting the Output
If the model values cluster together, the estimate is more defensible. If one model is far outside the others, inspect the assumptions behind it first: growth rate, discount rate, dividend growth, or book value. The sensitivity table is most useful when the market price sits near your fair-value range.
Sources & Methodology
Last updated:
Methodology
This worksheet compares four valuation frameworks: a discounted-earnings model, a Gordon-style dividend-discount model, the Graham formula, and the Graham Number. It uses the growth, discount, terminal-growth, EPS, dividend, and book-value inputs entered on the page to produce a valuation range and then compares that range to the current stock price through a margin-of-safety lens.
The result is a scenario-based estimate rather than a market quote or a full operating model. The discounted-earnings model on this page is simpler than a full free-cash-flow DCF, so the output is best used as a valuation cross-check and entry-price worksheet instead of a stand-alone investment recommendation.
Sources
- Glossary: Valuation (Investor.gov) โ SEC investor-education glossary entry defining valuation as an estimate of what an asset or company is worth.
- Earnings Per Share (EPS) (Investor.gov) โ SEC investor-education glossary entry defining earnings per share.
- Dividend (Investor.gov) โ SEC investor-education glossary entry describing dividends as shareholder cash distributions.
Frequently Asked Questions
Use your required rate of return โ typically 8-12%. Higher rates give more conservative (lower) valuations. CAPM or WACC can provide a systematic rate.
Each model captures different aspects of value. DCF values earnings power, DDM values dividend cash flows, and Graham methods emphasize asset backing. The range provides a valuation zone.
Graham recommended 30%+. Buffett targets 25%+ for stable businesses and 40%+ for uncertain ones. Higher margins compensate for estimation risk.
Use DDM for stable dividend-paying companies. Use DCF for growth companies that reinvest earnings rather than paying dividends.
Terminal growth should not exceed the long-term GDP growth rate (2-3%). Higher rates imply the company grows faster than the economy forever, which is unsustainable.
It's an estimate, not a precise number. The sensitivity table shows how ยฑ2% changes in assumptions can swing the value significantly. Use it as a guide, not a guarantee.
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