Fundamental analysis
Intrinsic value
Definition
An estimate of what a business is worth based on the cash it can produce over its life. It is always an estimate: two careful analysts can reach very different values.
Example
Say company XYZ trades at $40 a share. An analyst who expects its free cash flow to grow 8% a year for a decade might estimate intrinsic value near $55 a share, while one who expects 3% growth might land near $32. Same company, same price, opposite conclusions, which is why many investors think in a range of values rather than one precise number.
Hypothetical numbers, for illustration only.
Also defined in
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