Stock AnalizWhat is intrinsic value and how is it calculated?
Updated November 15, 2026 · examples use today’s data
Intrinsic value is what a business is worth based on the cash it will produce for its owners over its lifetime, brought back to today's money. The most common method is the discounted cash flow model, or DCF.
How a DCF works
You estimate free cash flow for the coming years, add a value for everything after that (the terminal value), and discount it all at a rate that reflects risk and the return you require. Cash received in ten years is worth less than cash today.
A real example
Apple produced $136.1 billion of free cash flow in its last fiscal year. With moderate growth and discount-rate assumptions, our model puts Apple's intrinsic value about 54% below today's market value of $5.18 trillion.
Treat it as a range
A DCF is only as good as its inputs: change the growth rate or discount rate by a point or two and the answer moves a lot. Use it to understand what the current price assumes, not as a precise target. A reverse DCF, which asks what growth the price implies, is often the more useful question.
Frequently asked questions
What discount rate should I use?
Many investors use 8% to 10% for large, stable companies and more for riskier ones. A higher rate gives a lower value.
Why use free cash flow instead of earnings?
Free cash flow is the cash left after investment that could actually be paid to owners; earnings include non-cash items.
Tools for this
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Educational content, not investment advice. Figures in the examples come from company filings and market prices and update automatically.