Monday, December 12, 2016

Simple Formula to Determine Intrinsic Value of a Stock

Actual Question:

Is there any simple strategy or formula to identify intrinsic value of a stock?


Yes there is.
  1. Multiply the earnings per share (EPS) by 15 and you will get one intrinsic value based on earnings.
  2. Multiply the book value per share by 1.5 and you will get another intrinsic value based on value of assets.
  3. The minimum of the two intrinsic values can safely be taken as the intrinsic value of the share of the company.
Since you asked a simple question I have given a simple answer, but do not make investment decision based on just the intrinsic value. There are many factor to be considered.

Suggested Further Reading: