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Editor

Founder at The Passive Investor

The Editor is also the Founder of The Passive Investor website. He is a part-time practising General Practitioner (GP) with an interest in all financial and investment-related topics. He is particularly focused on the integrated use of residential property, commercial property and the sharemarket to develop effective financial strategies for wealth accumulation and distribution.

Latest posts by Editor (see all)

• DIY Commercial Property Valuation - March 2, 2014
• Controlling the Valuation Process - March 1, 2014
• Reducing Body Corporate Fees - February 28, 2014

Intrinsic value is what a stock is really worth, rather than what price it is quoted as on the stockmarket.

Buying a stock when it is below its intrinsic value, and that is likely to have a higher forecast intrinsic value is an approach used by value investors, the most famous of who are Warren Buffet and Benjamin Graham.

There are a number of different ways to calculate it, and it is important to note that different investors may get different intrinsic values for the same stock, as it is based on a few assumptions about earnings, dividends, return on equity and the individual investors required rate of return.

It is not meant to be taken as an absolutely precise figure, but used as a guide to provide you an estimation of intrinsic value to assist your investing decision making.

In this blog post we are not going to discuss in detail the calculation of intrinsic value, but instead point you to software that can help do it for you.

However, if you wanted to learn more about it, a great book that explains intrinsic value in detail in a simple and easy to understand way is Value.able by Roger Montgomery, and this is good starting point.

Alternatively, some of the software that we will list below will have sections on their websites explaining in detail how they calculate intrinsic value and these are also well worth reading..

These are the software that we are aware of for Australian investors that specifically calculate intrinsic value:

Skaffold – $1330 pa
Lincoln StockDoctor – $795 pa (basic version)
Stocks In Value – $395 pa (basic version)
Intrinsic Value Investing – $120 pa (in US dollars)

We have previously used Skaffold, but the cost of this software is relatively high, particularly for those who are investing with a relatively small amount of capital.

After a google search we recently found an intrinsic value calculator at Intrinsic Value Investing that does basically the same kind of intrinsic value calculation as these more expensive software, but for a fraction of the cost (ie. $120 pa US dollars as noted above) using Microsoft Excel – hence this is what we are now using.

As always, it’s best to do your own independent research to decide which software is best for your circumstances and objectives.