The intrinsic value of a share is the actual and correct value of a stock, based on the fundamentals of its issuing company.

Besides the fundamentals of the firm, which are the numerical values written in its financial statements, the intrinsic value includes in its calculation also other aspects of the business, both tangible (for example, its assets and liabilities) and intangible (for instance, its brand or patents).

Value investing takes into account the intrinsic value in the valuation of the fair price of a stock: if it is above the current market price, the share is undervalued and should be bought by the investor; on the contrary, if it is below it, the stock is overvalued.

Moreover, the intrinsic value is usually used in the pricing of options.



7 thoughts on “What is the intrinsic value of a share?

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