Intrinsic Value Calculator

Estimate a stock's intrinsic value using three proven valuation models: Earnings Power Value (EPV), Graham Formula, and Dividend Discount Model (DDM). Compare the result to the current market price.

Average earnings per share over a full business cycle

Expected long-term earnings growth (GDP growth ~2-3% is conservative)

Formula

V = Normalized EPS / (Discount Rate - Growth Rate)

Estimated Intrinsic Value

$71.43

Margin of Safety

-5.0%

Upside / Downside

-4.8%

Assessment

No margin of safety — the stock appears overvalued based on these inputs. The market price exceeds the estimated intrinsic value.

Use the Margin of Safety Calculator for deeper analysis Try DCF Calculator for cash-flow-based valuation

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How It Works

  1. 1Choose a valuation model based on the type of company you're analyzing.
  2. 2Earnings Power Value (EPV): Best for stable companies with predictable earnings. Uses normalized earnings, a growth rate, and your required rate of return.
  3. 3Graham Formula: Benjamin Graham's classic formula. Uses EPS, expected growth rate, and current AAA corporate bond yield as inputs.
  4. 4Dividend Discount Model (DDM): Best for mature companies that pay consistent, growing dividends. Uses the Gordon Growth Model to value future dividend payments.
  5. 5Enter the current market price to see the margin of safety and potential upside/downside.

Worked example

Graham formula with EPS $5.00, expected growth 10%, AAA corporate bond yield 5.0%, and a $75 share price.

  1. 1Growth factor: 8.5 + 2 × 10 = 28.5
  2. 2Value: 5.00 × 28.5 × 4.4 ÷ 5.0 = $125.40
  3. 3Upside to the share price: (125.40 − 75) ÷ 75 = 67.2%

Intrinsic value of $125.40 per share, 67.2% above the current price.

The Graham formula is a quick, conservative screen. It assumes steady growth and says nothing about balance sheet quality.

Frequently Asked Questions

What is the intrinsic value of a stock?

Intrinsic value is an estimate of a stock's true worth based on its fundamentals — earnings, dividends, growth, and risk — rather than its current market price. If the intrinsic value is higher than the market price, the stock may be undervalued. Value investors like Warren Buffett and Benjamin Graham built their entire approach around buying stocks trading below intrinsic value.

Which valuation model should I use?

Use Earnings Power Value (EPV) for stable, mature companies with predictable earnings (e.g., utilities, consumer staples). Use the Graham Formula for a quick, conservative estimate — it's best for companies with moderate, steady growth. Use the Dividend Discount Model (DDM) for companies that pay consistent, growing dividends (e.g., REITs, dividend aristocrats). For the most robust analysis, use multiple models and compare the results.

What is the Graham Formula and how does it work?

Benjamin Graham's intrinsic value formula is: V = (EPS x (8.5 + 2g) x 4.4) / Y, where EPS is trailing twelve-month earnings per share, g is the expected annual growth rate over the next 7-10 years, 8.5 is the base P/E for a zero-growth company, 4.4 was the average AAA corporate bond yield when Graham wrote the formula, and Y is the current AAA corporate bond yield. The formula adjusts for both growth expectations and interest rate environments.

What is a good discount rate to use?

A common starting point is 10%, which roughly equals the historical average annual return of the S&P 500. For riskier companies (small caps, emerging markets, cyclical businesses), use 12-15%. For very stable blue chips, 8-10% may be appropriate. The discount rate represents your required rate of return — what you need the investment to earn to justify the risk.

How accurate are intrinsic value calculations?

No intrinsic value calculation is precise — they're estimates based on assumptions about the future. That's exactly why Benjamin Graham insisted on a margin of safety: buying at a significant discount to your calculated intrinsic value protects you if your assumptions are wrong. Use these calculators as a starting point for analysis, not as a definitive answer.

What is the difference between this and a DCF calculator?

A DCF (Discounted Cash Flow) calculator projects specific year-by-year free cash flows over a forecast period plus a terminal value. The models here are simpler: EPV uses a single normalized earnings figure, the Graham Formula uses EPS and growth, and DDM uses dividends. DCF is more detailed but requires more assumptions. These models are quicker and often sufficient for a first-pass valuation. For a full DCF analysis, try our DCF Calculator.