StocksResult
📝 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." 🌱💰