Intrinsic Value Calculator

This calculator relies on a modernized adaptation of Benjamin Graham's classic valuation formula to evaluate a stock's worth. The primary equation determines the intrinsic value (IV) using earnings per share, expected growth, and the corporate bond yield as a benchmark for risk-free return. The formula is expressed as: IV = [EPS × (8.5 + 2g) × 4.4] / Y, where EPS is the earnings per share, g is the expected annual growth rate for the next 7 to 10 years, 8.5 represents the baseline P/E ratio for a zero-growth company, and Y is the current triple-A corporate bond yield. Additionally, the tool calculates your margin of safety percentage using the formula: MoS = [(Intrinsic Value - Current Market Price) / Intrinsic Value] × 100.

Imagine you are analyzing Apex Corporation, a stable enterprise currently trading at a market price of $45.00 per share. Apex has an earnings per share (EPS) of $3.50, an anticipated annual growth rate of 5% over the next decade, and the current corporate bond yield stands at 5.5%. First, we calculate the valuation multiplier by taking 8.5 and adding twice the growth rate: 8.5 + (2 × 5) = 18.5. Next, we multiply this by the EPS and the bond adjustment factor of 4.4: $3.50 × 18.5 × 4.4 = $284.90. Dividing this product by the corporate bond yield of 5.5 gives us an intrinsic value of $51.80. Finally, to find the margin of safety, we calculate (($51.80 - $45.00) / $51.80) × 100, which yields a healthy 13.13% discount, indicating a potentially attractive entry point.

When inputting growth rates, always remain conservative; projecting double-digit growth indefinitely will skew your valuation and risk capital. Pair your intrinsic value findings with qualitative research, such as analyzing competitive moats and balance sheet strength. Finally, demand a robust margin of safety, typically 20% to 30% or higher, to cushion your portfolio against unexpected macroeconomic downturns or temporary earnings misses.