Message Font: Serif | Sans-Serif
No. of Recommendations: 3

Intrinsic Value
Depending on how you want to examine a company? {hidden things like goodwill, name brand,,,) - A simple view, it is the value in todays dollars, of the future earnings of the company. IOW, how much you would put in a savings account today at a specific interest rate to give you the same return as the earnings.

The interest rate to use and the forecast of earnings, even which earnings to use are different for different folks but the basic idea is to divide the forecasted earnings by the interest rate.

For example: if a company has earnings of $3.00 per share and you beleive 6% is a good interest then you would divide 3/.06 = $50/Share

The Invested Capital is the sum of the companies equity and long term debt. The total amount of money that is "invested" in the company.
This is also called the Capitalization.

So for example in our previous example, lets say the market price of the stock above is $60/share and there is $20/share of debt, the invested capital is $80/share. To get the total multiply by the shares.

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.