Intrinsic Value Calculator

What Is Intrinsic Value?

Intrinsic value is the true, underlying worth of a stock based on its fundamentals — independent of its current market price. Benjamin Graham, the father of value investing, developed a formula to estimate intrinsic value using a company's earnings, expected growth, and prevailing interest rates.

Graham's Intrinsic Value Formula

V = EPS × (8.5 + 2g) × 4.4 / Y

Understanding Each Variable

• V (Intrinsic Value): The estimated fair price per share. If V is higher than the current market price, the stock may be undervalued.
• EPS (Earnings Per Share): The company's trailing twelve months earnings divided by shares outstanding. Use TTM EPS for the most current picture. Find this on any financial site (Yahoo Finance, Morningstar).
• 8.5 (P/E Base): Graham's constant representing the P/E ratio of a stock with zero growth. This is the baseline valuation for a company that isn't growing at all.
• g (Growth Rate): The expected annual earnings growth rate (%) over the next 7–10 years. Use analyst consensus estimates. Be conservative — Graham recommended using lower estimates to build in safety.
• 4.4 (Graham's Yield): The average AAA corporate bond yield when Graham wrote The Intelligent Investor (1962). This serves as the benchmark “required return” in the original formula.
• Y (Current Bond Yield): Today's AAA corporate bond yield (currently ~5.29% per Moody's). This adjusts the formula for the current interest rate environment. Higher yields reduce intrinsic value, reflecting that bonds are a more competitive alternative.

How to Use This Calculator

1. Look up the stock's trailing EPS on Yahoo Finance or similar
2. Find analyst growth estimates (5-year forward EPS growth rate)
3. Enter the current stock price
4. The bond yield defaults to 5.29% — adjust if rates change significantly
5. Click Calculate and review your margin of safety

Intrinsic Value vs. Graham Number

Both are Benjamin Graham formulas, but they serve different purposes:

• Graham Number (√(22.5 × EPS × Book Value)) — Uses current earnings and book value. Best for asset-heavy, stable companies. It's a quick screen that doesn't factor in growth. Try our Graham Number Calculator →
• Intrinsic Value Formula (this calculator) — Incorporates expected future growth and adjusts for interest rates. Better for companies with predictable growth trajectories. More forward-looking.

Use both together: If a stock passes both the Graham Number and intrinsic value tests, you have stronger conviction in its undervaluation.

Limitations of This Formula

• Growth rate sensitivity: Small changes in g dramatically affect the result. A stock with 15% projected growth values much higher than one with 10%. Always be conservative.
• No moat analysis: The formula doesn't assess competitive advantages, management quality, or industry dynamics.
• Earnings quality: TTM EPS can be misleading if earnings are cyclical, include one-time items, or are artificially inflated.
• Interest rate dependency: The 4.4/Y adjustment can over- or under-correct depending on the rate environment.
• Not for all companies: Doesn't work well for companies with negative earnings, highly cyclical businesses, or early-stage growth companies.

When to Use This Calculator

This calculator works best for established, profitable companies with consistent earnings and predictable growth — think blue chips, consumer staples, and mature tech companies. For high-growth startups or turnaround situations, consider a DCF model or other valuation methods.

Want to go deeper? Read our complete guide to value investing →