Intrinsic Value

Intrinsic value is the real worth of an asset based on fundamentals, not its market price.

A quick example

What it means for you

It is what value investors estimate to decide if something is cheap.

Picture this

Three analysts value the same bank: one assumes 4% long-term growth and gets $60; another assumes 2% and gets $45; a third applies a different discount rate and gets $52. The stock trades at $48. Two analysts see a bargain, one sees an overpriced stock, and all three are reasonable — the differences are assumptions, not errors. The scenario is why intrinsic value is a range and a discipline, not a precise number: the honest investor buys only when the market price sits far outside the whole range.

Common mix-ups

It is an estimate, not a fact; two analysts can land far apart.

How to apply it

Develop your own intrinsic-value estimate before buying, then only act when the price is well below it. The discipline — not the precision — is what protects you, because it forces you to know what you are paying for.

Key takeaway

Intrinsic value is a reasoned estimate of what an asset is worth, and the market price is a fact — the gap between them is where value investing happens. Because the estimate depends on assumptions about growth and discount rates, two smart analysts can land far apart, so intrinsic value is a range, not a point. Act only when the price sits well outside the whole range, and treat the discipline, not the precision, as the protection. Being roughly right with a cushion beats being precisely wrong.

Definitions reviewed by the Investing Glossary editorial team.