The Best Way to Find Intrinsic Value of Stock in 2021

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Intrinsic Value of Stock

Are you interested to know how to calculate the intrinsic value of stock? Then you are in the right place.

The present post in detail tells how to calculate the stock intrinsic value online and for free. Before going ahead, you should know what the stock’s intrinsic value meaning is.

What is the Intrinsic Value of Stock?

The intrinsic value of stock is the fair value of the stock, which is calculated through fundamental analysis.

Therefore, a stock’s intrinsic value is based on the fundamental analysis of the stock.

A stock is a security, which represents the ownership of a fraction of a company.

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It is also called the true value of the stock or the fair value of the stock.

This value is not the same as the current market price (CMP) of the stock. This term is very useful while doing long term investment in stocks.

How to Use Intrinsic Value of Stock?

The intrinsic value of stock can be used for long term investment in stocks. Before that, the stock quality should be good. If the stock quality is good, you can go for the intrinsic value of stock. If the stock quality is bad, the intrinsic value of stock may not be useful.

For a stock to be value investing, the current market price of the stock should be less than the intrinsic value of the stock.

As a thumb rule, the intrinsic value of stock should be at least 25% higher than the current market price of the stock. Then the stock is suitable for value investing for the long term.

Difference between Intrinsic Value of Stock and Stock Price

Everybody knows that it is very difficult to find the actual intrinsic value (or true value) of a stock. Therefore, the intrinsic value of stock is the predicted fair value of the stock.

However, the stock price is the present value of the stock. The stock price is also known as the current market price (CMP) of the stock.

Calculate Intrinsic Value of Stock Online

To calculate the intrinsic value of stock online, you should use one online calculator. I have developed one such calculator to find the intrinsic value of stock. It is based on the earnings per share (EPS) and the expected annual growth rate of the stock. It is the best stock intrinsic value calculator, and it correctly predicts the fair value of a stock.

However, there are other methods to calculate the intrinsic value of stock. You can use my stock intrinsic value calculator for free, which is given in the below link. Here, the margin of safety is considered as 25%.

Stock intrinsic value calculator

How to Use my Stock Intrinsic Value Calculator?

To use my stock intrinsic value calculator, you have to put the values of the TTM earnings per share and the expected annual growth rate of the stock. These two fields are mandatory. Here, the term TTM is the trailing twelve months.

Intrinsic Value of Stock

People from all countries can use my stock intrinsic value calculator. This is a universal calculator.

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Earnings per Share – TTM

What is Earnings per Share or EPS?

To find the TTM earnings per share of stock, go to Value Research Online Website and then go to Stocks.

Then search for a stock. Then go to Financials and then Annual Consolidated. In the Annual Consolidated column, go to Ratios.

Again, in the Financials section, find the Adjusted EPS (Rs). The value in the first column such as TTM is the TTM Earnings per Share.

You note down this value and put it in the calculator. This website is for Indian stocks such as NSE and BSE.

You may also refer to any other websites, to find the TTM earnings per share of the stock, as suitable for you.

Intrinsic Value of Stock

For other country stocks, you can refer to Yahoo Finance or any other suitable websites, to find the TTM earnings per share of the stock.

Intrinsic Value of Stock

To tentatively find the expected annual growth rate of stock, you can go to Yahoo Finance (from Analysis section).

Intrinsic Value of Stock

To find the expected annual growth rate of stock in a more correct way, you can use my free online stock book value growth rate calculator.

Intrinsic Value of Stock

Put the current book value of the stock, the previous book value of the stock, and the number of years in between.

You can find the historical book value from the Value Research Online Website or any other website suitable for you.

I recommend considering the number of years as 5 or more. Therefore, it will give the average book value growth rate of the stock, during the number of years you have used.

Intrinsic Value of Stock

Intrinsic Value of Stock Example

Now consider one example of how to use my stock intrinsic value calculator.  

HDFC Bank Ltd. – NSE (as on 1st Oct. 2020)

TTM Earnings per Share:

First, find the TTM earnings per share of HDFC Bank Ltd.

Earnings per share – TTM = Rs. 51.79 (from Value Research Online Website)

Intrinsic Value of Stock

Expected Annual Growth Rate:

Then find the expected annual growth rate of HDFC Bank Ltd. The following two methods are used, to calculate the expected annual growth rate of HDFC Bank Ltd.

Method – 1: By analysts (Yahoo Finance)

Expected annual growth rate = 20.98 %

Intrinsic Value of Stock

Method – 2: By the use of my stock book value growth rate calculator

Expected annual growth rate = 16.07 % (please refer to the below figure)

I used the following to calculate the book value of HDFC Bank Ltd., by the use of my stock book value growth rate calculator. Refer to the second above figure for the data.

Book value (Mar-16) = Rs. 146.95

TTM book value (as on 1st Oct. 2020) = Rs. 333.59

Number of years = 5.5

Intrinsic Value of Stock

In the above example, you can notice that:

The book value growth rate of HDFC Bank Ltd. given by Analysts (Yahoo Finance) is more than calculated by the book value growth rate calculator.

Intrinsic Value:

HDFC Bank Ltd. (as on 1st Oct. 2020)

If you use Method – 1 for the expected annual growth rate, the intrinsic value = Rs. 1270.1

If you use Method – 2 for the expected annual growth rate, the intrinsic value = Rs. 1064.4

Refer to the below figures.

In the above example, you can notice that Method – 1 yields a higher intrinsic value of HDFC Bank Ltd. than Method – 2.

Hence, it is better to use Method – 2. As per my experience, Method – 2 gives a tight and a more correct intrinsic value of stock.

Bonus Tips:

While calculating the book value growth rate of stock, ensure that the book value of the stock in a given year is not abruptly changed several times.

Further, I recommend using Method – 2 to calculate the intrinsic value of stock.

I welcome all people to use my online stock intrinsic value calculator and give your valuable comments.

Again, if you have any queries or suggestions, please comment below.

Moreover, if you like the post, please share it with your friends and colleagues.


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