How Do You Determine A Stocks Intrinsic Value?
The intrinsic value of a stock can be difficult for investors to determine. Most investors are accustomed to looking at the market values of stocks that show the rise and fall of international markets. Intrinsic value indicates the true value of a particular business based on ephemeral factors like research, brand identity and market psychology. Every investor can find the intrinsic value of a bond, security or stock with a few simple calculations. Eliminate poorly run businesses from intrinsic value calculations by starting with a cash flow analysis. Experienced investors will project annual revenues and expenses for the next decade before taking the trouble to calculate intrinsic value. These calculations should be adjusted based on a reasonable interest rate to account for changes in lending and inflation. Utilize the current interest rate on government bonds as a way to differentiate market value from intrinsic value. These bonds are designed as stable investments for people who wa
