Intrinsic Value Calculator?

[kctan]

Hi,

I am new in Investing and is wondering if there is any online Intrinsic value calculator that I can use?

Any advice will be appreciated, thank you.

[wcpk90]

Hi kctan,

I would recommend that a manual approach for the computation of intrinsic value be used. Not really advisable to use an online tool IMHO

That being said, you could visit Damodaran's website. He offers a variety of DCF models that you could use.

However, it also depends on the company you are looking at, if you cannot make an accurate prediction of cashflow, DCF model would not be appropriate.

[kctan]

Hi kctan,

I would recommend that a manual approach for the computation of intrinsic value be used. Not really advisable to use an online tool IMHO

That being said, you could visit Damodaran's website. He offers a variety of DCF models that you could use.

However, it also depends on the company you are looking at, if you cannot make an accurate prediction of cashflow, DCF model would not be appropriate.

Thank you so much, may I know what is the DCF model?

[CityFarmer]

Hi kctan,

I would recommend that a manual approach for the computation of intrinsic value be used. Not really advisable to use an online tool IMHO

That being said, you could visit Damodaran's website. He offers a variety of DCF models that you could use.

However, it also depends on the company you are looking at, if you cannot make an accurate prediction of cashflow, DCF model would not be appropriate.

On top of DCF model, one other way to compute intrinsic value is SOTP

DCF = Discounted Cash Flow
SOTP = Sum Of The Part

You can google both for more detail.

[wcpk90]

Bruce Greenwald's book gives a good idea of how to valuate a business. You could look into it as well.

[dzwm87]

IMO, I will be wary of any instant magic formula which helps to calculate a decent intrinsic value of a company. If it's so easy, then we won't be seeing just one Warren Buffett. Joel Greenblatt does promote a certain form of magic formula but the focus was meant for a well-diversified portfolio with a passive approach. Even Ben Graham advocates the net-net screening. Again, that is based on a well-diversified portfolio.

We all know a good buy comes when we are able to pay 50c for a dollar. The idea is simple but not easy to implement and it often takes a balance between arts and science to be able to call a good investment decision. Something which I am still trying to learn more about at this point of time.

For the science part, it comes more from knowing your basic valuations model - Discounted Cash Flow (DCF), Sum of the Parts (SOTP), Revalued NAV (RNAV) and comparative ratio analysis between peers - of which you can find them being covered in any finance textbook. Learning it is easy but practicing and mastering it takes a lot of time as the approach may differ when it comes to different industries.

For the art part, it comes from having a good judgment of a company's competitive edge. To arrive at a good judgment call will be a function of time, reading and speaking to mgmt teams. Apart from that, one also need to be good at entry/exit position for its portfolio holdings. This comes from having a disciplined approach and less on emotions.

All in, it's really easier said than done but the journey/game is exciting. I believe as long as I don't mess it up big time to get myself 'game over' then investing is truly a long term game - with definitely something new to learn each day.

[KopiKat]

IMO, I will be wary of any instant magic formula which helps to calculate a decent intrinsic value of a company. If it's so easy, then we won't be seeing just one Warren Buffett. Joel Greenblatt does promote a certain form of magic formula but the focus was meant for a well-diversified portfolio with a passive approach. Even Ben Graham advocates the net-net screening. Again, that is based on a well-diversified portfolio.

We all know a good buy comes when we are able to pay 50c for a dollar. The idea is simple but not easy to implement and it often takes a balance between arts and science to be able to call a good investment decision. Something which I am still trying to learn more about at this point of time.

For the science part, it comes more from knowing your basic valuations model - Discounted Cash Flow (DCF), Sum of the Parts (SOTP), Revalued NAV (RNAV) and comparative ratio analysis between peers - of which you can find them being covered in any finance textbook. Learning it is easy but practicing and mastering it takes a lot of time as the approach may differ when it comes to different industries.

For the art part, it comes from having a good judgment of a company's competitive edge. To arrive at a good judgment call will be a function of time, reading and speaking to mgmt teams. Apart from that, one also need to be good at entry/exit position for its portfolio holdings. This comes from having a disciplined approach and less on emotions.

All in, it's really easier said than done but the journey/game is exciting. I believe as long as I don't mess it up big time to get myself 'game over' then investing is truly a long term game - with definitely something new to learn each day.

Well said!

In my own search for the Holy Grail of a standard formula (being Left-Brain 'brain-washed for my working life, everything ought to have a formula...) for Intrinsic Value, the more I read of different successful Value Investors, their approach and methodology,..., I'm not sure whether I'm getting more confused or more enlightened... When I read Charlie Munger, OMG! I think I won't be able to even come close to his matrix approach of analysis and DIY investing seems impossible for me... But, when I read Warren Buffett, Peter Lynch, Seth Klarman,... they seem to make it so easy and possible for even a laymen...

Back to IV, my conclusion is, there's actually no such thing as a single fixed figure for Intrinsic Value... It's a range and the range is very likely to differ from one person to another, depending on their assumptions made and the approach / methodology used...

So, ya, there're many roads to Rome. Choose one that's suitable for oneself...

Hee.. I don't think I'm helping at all...

[kctan]

Thank you for the comments, friends. These are helpful!

[Some-one]

There is no one correct intrinsic value. If you are looking for that value and hoping to profit by just buying at a discount to its intrinsic value and selling when it reaches that, you would be sorely disappointed. Investing is both an art and science.

[CityFarmer]

KopiKat and dzwm87 both have insightful postings on intrinsic value. Let me add-on by looking at it from the definition of intrinsic value

In one of WB shareholder letter, he stated

"We define intrinsic value as the discounted value of the cash that can be taken out of a business during its remaining life. Anyone calculating intrinsic value necessarily comes up with a highly subjective figure that will change both as estimates of future cash flows are revised and as interest rates move. Despite its fuzziness, however, intrinsic value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses."

It seems that intrinsic value is a definite value. Our valuation is subjective due to our limitation in predicting future cash flows and interest rate (which are difficult due to dynamic of business and financial markets)

With proper margin of safety, it helps to compensate the limitations, thus hopefully our valuation of intrinsic value is lower than and close to THE actual one.

Make sense?