Estimate a stock's intrinsic value using DCF, Dividend Discount Model, and Graham formulas. Includes margin of safety, sensitivity table, and multi-model comparison.
Intrinsic value is the estimated true worth of a stock based on its fundamentals — earnings, growth, dividends, and assets — independent of its current market price. Comparing intrinsic value to market price is the foundation of value investing, as popularized by Benjamin Graham and Warren Buffett.
This calculator offers four valuation models: Discounted Earnings (a simplified DCF), the Dividend Discount Model (Gordon Growth), the Graham Formula, and the Graham Number. Each model approaches valuation from a different angle, and comparing results across models provides a more robust estimate than relying on any single method.
The margin of safety — the gap between intrinsic value and current price — is your cushion against estimation errors. A margin above 20-30% is generally recommended. The sensitivity table shows how changes in discount rate and growth rate assumptions affect the valuation, revealing which assumptions matter most. Check the example with realistic values before reporting.
Without estimating intrinsic value, every stock purchase is speculation. This calculator gives you four different valuation lenses and a sensitivity analysis to understand how robust your estimate is before committing capital. Keep these notes focused on your operational context. Tie the context to the calculator’s intended domain. Use this clarification to avoid ambiguous interpretation.
DCF = Σ(EPS × (1+g)^t / (1+r)^t) + Terminal Value / (1+r)^n DDM = D₁ / (r − g) where D₁ = current dividend × (1+g) Graham = EPS × (8.5 + 2g) × 4.4/Y Graham Number = √(22.5 × EPS × Book Value)
Result: Intrinsic Value ≈ $115
Projecting $5 EPS growing at 8% for 10 years, discounted at 10% with 3% terminal growth, yields an intrinsic value of approximately $115. At a stock price of $85, that's a 26% margin of safety.
Use consistent units, verify assumptions, and document conversion standards for repeatable outcomes.
Most mistakes come from mixed standards, rounding too early, or misread labels. Recheck final values before use. ## Practical Notes
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Use your required rate of return — typically 8-12%. Higher rates give more conservative (lower) valuations. CAPM or WACC can provide a systematic rate.
Each model captures different aspects of value. DCF values earnings power, DDM values dividend cash flows, and Graham methods emphasize asset backing. The range provides a valuation zone.
Graham recommended 30%+. Buffett targets 25%+ for stable businesses and 40%+ for uncertain ones. Higher margins compensate for estimation risk.
Use DDM for stable dividend-paying companies. Use DCF for growth companies that reinvest earnings rather than paying dividends.
Terminal growth should not exceed the long-term GDP growth rate (2-3%). Higher rates imply the company grows faster than the economy forever, which is unsustainable.
It's an estimate, not a precise number. The sensitivity table shows how ±2% changes in assumptions can swing the value significantly. Use it as a guide, not a guarantee.