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How can we find Intrinsic Value of a company using FA? Thank you..
Is there any formula for that?

Theoretically, the intrinsic value of a company is the present value of all future net cash flow the company can generate over its lifespan.

A man’s intrinsic value is not judged by how much net assets he has. We have to take into account, his integrity, honor and courage, etc., as well.

In respect of a company, to know its intrinsic value, we have to take into account the following:
Earnings per share; Prospective Earnings; Cash Flow; Caliber of Management; Net Asset Backing; Special Rights; Patents; Quality and competitiveness of its products in the global arena.

When we buy shares, we take into consideration the safety of our principle, capital gains as well as dividend yield. So the stock that is able to give us a higher return and higher safety of our capital is definitely worth more than the one that gives us a lesser return and lesser safety of our capital. Also to be taken into account, are the market demand, liquidity of the stock and the present interest rate.
There is no formula to assess the intrinsic value of a stock. But the above points should give you some ideas to work on.

ben, y dun start a new section so tat everybody can discuss or evaluate on the intrinsic value of a company...

Soo...,

Try the book by Ho Kok Mun.....



IN his book.....there is a method to calculate the intrinsic value of a company......then to use it accordingly to calculate the fair price for one to enter..not bad as a guide.

alicafe,
This thread created by soo can be used for the purpose. Anyway, thanks for the proposal.

TeeCS wrote:
Soo...,

Try the book by Ho Kok Mun.....



IN his book.....there is a method to calculate the intrinsic value of a company......then to use it accordingly to calculate the fair price for one to enter..not bad as a guide.

Thanks TeeCS, actually I had gone through the book. He provide some examples on how to calculate the Intrinsic value as well.

But what Ben said is correct also, that we also need to consider the company's patent, special rights, quality ... which is hard to count. But anyway the book provide a reference on his way to calculate intrinsic value.

Hi Mr.Tee & Soo,

I first read this book somewhere back in Jan 2007. It works pretty well for most of counters when come to the "Intrinsic Value" calculation.

However, there are certain stock with much more lower "Intrinsic Value" ­base­d on the calculation shown in the book. One example is counter DIALOG (7277). As at the latest Financial Year calculation, by applying average PER of 10 and average EPS Growth Rate of 10%, the "Intrinsic Value" happened to be RM0.33 ONLY!

Does anyone know why the Intrinsic Value for this counter is only RM0.33 where as the counter is now trading at around RM1.00?

Peter wrote:


Does anyone know why the Intrinsic Value for this counter is only RM0.33 where as the counter is now trading at around RM1.00?

Simple... the price of a counter is determined by the supply and demand of the stock. In FA term, it would be that the counter is OVERvalued.
Its not unlike during recession, many counters will be UNDERvalued in terms of intrinsic value.
However, speaking of value here, a friend of mine had just asked me how to find the true value of a company over a tea session.
My answer was simple - Say you buy a stock, what is the value of the stock to you?
This friend of mine is a fundamentalist and a big fan of Buffett. So I said, Yes, fundamentally speaking we should find the value of the company. And yes, Buffett is right in the sense that when we invest, we should invest in the business itself.
Now, as a small timer, with no substantial shareholding in the company, what value does a stock present to us?
Its profits? Nope... they have got nothing to do with us, since we do not have any say in declaring the dividends.
The only tangible value is the dividend.
Now, again, do we have any way of ensuring that the company that we invested in will declare dividends? Do we? Or do we not?

The fact is that in Msia, most listed companies are still family owned. These owners DICTATE how much they would declare dividends to their whims and fancy. Hence, what is the point of value again?

I m back to my charts. Have a nice day!

Peter, Dialog value no, the more correct term is price; is due to the the prospect of the takeover and the resulting monopoly on Petronas job. It is a bet ­base­d on hope.