How To Calculate Intrinsic Value Of A Stock (FACEBOOK Stock Example!)

Not sure how to calculate the intrinsic value of a stock? This video got you covered.

When it comes to investing, a good business becomes a bad investment when you pay too high a price. So how do you know if it's the right price? The answer is intrinsic value. In this video, we're going to run through how to find the intrinsic value of a stock.

Keynotes:
0:00 Intro

1:07 What Is Intrinsic Value

As defined by Warren Buffett, the intrinsic value of a stock is the discounted value of cash a business is able to produce throughout its remaining life. Hence, what we are trying to do here in the discounted cash flow valuation is to simply figure out how much cash a business is able to produce, discounted back to present value.

2:00 Time Value Of Money

Money received in the future is worth less than in the present, which explains why we have to discount future money back to present value in the discounted cash flow valuation model

3:40 Intrinsic Value Calculation

Here we use a simple example to illustrate how to calculate the intrinsic value of a stock!

14:28 Intrinsic Value Example (Facebook)

Here, we'll use Facebook (FB) as an example and calculate its intrinsic value together! A few figures we need before the actual calculation are projected growth rate, discount rate, time projection and finally cash flow.

21:14 Important Pointers

Here are a few things to take note when calculating the intrinsic value of a stock:
- Intrinsic value is not an exact figure but rather a range of figures
- Always apply a margin of safety onto your intrinsic value to account for possible miscalculation and unforeseen events
-There are many models of discounted cash flow valuation and the one we shared today is a very simplified basic one

I hope the video today has helped you learn how to value a stock through the discounted cash flow example!

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Disclaimer: I am an independent investor and not a financial advisor. All information presented are for entertainment and educational purposes only and should not be taken as financial advice. As always, make sure to do your own research before investing in anything!

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