Intrinsic value of a stock is its true value. This is calculated on the basis of the monetary benefit you expect to receive from it in the future. Let us put it this way – it is the maximum value at which you can buy the asset, without making a loss in the future when you sell it.
Intrinsic value refers to some fundamental, objective value contained in an object, asset, or financial contract. If the market price is below that value it may be a good buy—if above a good sale.
When evaluating stocks, there are several methods for arriving at a fair assessment of a share's intrinsic value.
Estimate all of a company's future cash flows. Calculate the present value of each of these future cash flows. Sum up the present values to obtain the intrinsic value of the stock.
Learn more about intrinsic value here:
