📝 What is Intrinsic Value?

💎 What is Intrinsic Value? Imagine you want to buy a mobile phone 📱. ✔️ The shopkeeper says the price is ₹30,000. ✔️ But you think — "Hmmm... this phone’s real worth is only ₹20,000 because its features are old!" That ₹20,000 — the value you feel is fair — is called the Intrinsic Value. 🎯 👉 Intrinsic Value = The "true" worth of something — not its market price — but what it's really worth based on its quality, performance, and future potential! 🎯 Why is Intrinsic Value Important for Stocks? Stocks also have market prices — but is that their real value? Not always! 😲 ✔️ Market price can be high due to hype 📢 ✔️ Or low due to panic 😱 But smart investors like to find the Intrinsic Value — to see if the stock is truly cheap (undervalued) or costly (overvalued). 💰 🛠️ How to Calculate Intrinsic Value? (Simple Way!) There are many tricky ways — but let’s keep it super simple! 🔍 Discounted Cash Flow (DCF) Method Imagine a mango tree 🥭. ✔️ Every year it gives you 100 mangoes. ✔️ You expect to enjoy this for 5 years. But 100 mangoes next year are worth less than 100 mangoes today (because of time, risk, inflation). So you reduce their value to today's worth. That’s DCF! 💡 🎨 Funny Example: Bunty has a lemonade stall 🍋: ✔️ He earns ₹10,000 every year. ✔️ He expects this for 5 years. ✔️ He wants at least 10% return (because of risk). 👉 Intrinsic Value = ₹10,000/(1.1)¹ + ₹10,000/(1.1)² + ₹10,000/(1.1)³ + ₹10,000/(1.1)⁴ + ₹10,000/(1.1)⁵ ✔️ Add them = Total Intrinsic Value 💰 ✔️ If share price is below this value — BUY! 😍 ✔️ If share price is above this value — Avoid or sell! 🙅 ⚠️ Important Things to Remember: ✔️ Intrinsic Value is an estimate — not a perfect truth! 🔮 ✔️ Different people can get different values! 🤷‍♂️ ✔️ Always keep a Margin of Safety — because the future is uncertain! 🌪️ 🤔 Other Quick Ways to Check Intrinsic Value: ✔️ P/E Method: EPS × Fair P/E ratio ✔️ Book Value Method: Assets – Liabilities ✔️ Dividend Discount Model: For companies that give regular dividends 🔑 In Short: ✔️ Intrinsic Value = The real worth of a stock — not its market price! ✔️ Helps to find undervalued (cheap) or overvalued (costly) stocks. ✔️ Useful for smart long-term investors! 📈 💡 "The market may shout loudly with prices, but the quiet truth of value whispers from within." 🌱💰