Our intrinsic value calculator helps you determine the fair market value of a stock based on key financial metrics.

By inputting the earnings per share (EPS), expected growth rate, and price-to-earnings (P/E) ratio, you can estimate whether a stock is overvalued or undervalued.

Use this tool to make informed investment decisions and assess long-term stock potential.

Calculate Intrinsic Value of a Stock

Calculate Intrinsic Value of a Stock

$
Enter the earnings per share in USD.
%
Enter the expected annual growth rate as a percentage.
Enter the expected Price-to-Earnings ratio.

How to Calculate Intrinsic Value of a Stock

Calculating the intrinsic value of a stock involves using fundamental financial metrics to estimate its true value, rather than relying on market prices, which can be influenced by external factors like market sentiment or short-term fluctuations. Here’s a step-by-step guide on how to do it:

  1. Earnings Per Share (EPS): The first key metric is the earnings per share, which represents a company’s profitability on a per-share basis. It is calculated by dividing the company’s net income by the number of outstanding shares. This figure gives insight into the company’s ability to generate profits for shareholders.
  2. Expected Growth Rate: The next step is to estimate the expected earnings growth rate. This is a forecast of how much the company’s earnings are expected to grow annually, typically expressed as a percentage. Analysts often base this estimate on historical performance, industry trends, and the company’s business strategy.
  3. Price-to-Earnings (P/E) Ratio: The P/E ratio is a widely-used valuation metric that compares a company’s stock price to its earnings per share. It provides a measure of how much investors are willing to pay for each dollar of earnings. A higher P/E ratio suggests higher growth expectations, while a lower P/E indicates the stock may be undervalued.

The Intrinsic Value Formula

Once you have the EPS, expected growth rate, and P/E ratio, you can calculate the intrinsic value using the following formula:

\(\text{Intrinsic Value} = \text{EPS} \times \text{P/E Ratio} \times (1 + \text{Growth Rate})\)

This formula multiplies the current earnings by the expected growth and the P/E ratio to determine the stock’s intrinsic value, giving you a clearer idea of what the stock is worth based on its financials.

By comparing the intrinsic value with the current market price, you can assess whether a stock is undervalued (good buying opportunity) or overvalued (potential sell).

This approach provides a more grounded analysis for long-term investors looking to make informed decisions.


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