Intrinsic Value

Intrinsic value means an estimate of what an asset or company is truly worth based on fundamentals. In simple terms, intrinsic value is what investors believe something should be worth. Intrinsic value is important because investors compare it with the market price to judge whether an asset looks undervalued or overvalued. It may be based on cash flows, earnings, assets, growth, and risk. For example, if an investor estimates a stock’s intrinsic value at $120 but it trades at $90, the investor may think it is undervalued. Intrinsic value is not a fixed fact. Different investors can calculate different values depending on their assumptions.