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

## 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:

**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.**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.**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:

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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