What is the Intrinsic value of a stock

Discussion in 'School Of Stock Market' started by Shreenath A, Sep 6, 2020.

  1. Shreenath A

    Shreenath A New Member

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    Could anyone please explain what is the intrinsic value of a stock and how it is calculated? Could you explain with an example.
     
  2. Michael Gonsalves

    Michael Gonsalves Member Staff Member

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    The intrinsic value is the "real value" that one would get from an independent buyer. One way to determine this is by the Net Asset Value (NAV) method by which we assume that the Company is being wound up. We take the market value of all the assets and deduct the liabilities to arrive at the NAV.

    Another method is to assume that the Company is a going concern and to discount the future cash flows. This is called the discounted cash flow method.

    In reality, companies listed on the stock market are not valued based on the "intrinsic value" but on several other tangible and intangible perceptions of the participants, depending on greed and fear. This is why the market value of a company's shares fluctuates wildly even within a short period of time.
     
  3. Shreenath A

    Shreenath A New Member

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    Thanks Sir
     
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