Intrinsic value is an estimate of what a business may be worth based on future economic benefits. It is a model, not an observable market number.
Cash-flow approach
A discounted cash-flow model estimates future free cash flows and discounts them to present value. Small changes in assumptions can materially change the result.
Earnings approach
An earnings or P/E framework can estimate value from sustainable earnings and an appropriate multiple, but the multiple itself depends on assumptions.
Margin of safety
Because forecasts are uncertain, investors often compare an estimated value with the market price and test downside scenarios rather than relying on one target.
What to disclose
Show revenue growth, margins, reinvestment, discount rate, terminal assumptions and sensitivity. A hidden assumption makes a valuation difficult to audit.
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