Hi
A newbee to this posting, can anyone help me with a reasonable equation for arriving at an intrinsic value??
Dave
I will pass your question to a friend of ours... chatGPT.... who responds:
...Certainly, there are several methods used to estimate the intrinsic value of a company's stock market price. One commonly used method is the discounted cash flow (DCF) analysis.
The DCF analysis estimates the present value of future cash flows that a company is expected to generate. The general formula for DCF analysis is as follows:
Intrinsic Value = Sum of (Cash flow in year n / (1+r)^n)
Where:
- Cash flow in year n represents the expected cash flows generated by the company in a specific year
- r represents the discount rate, which is the rate of return required by investors to invest in the company's stock.
To use this formula, you would need to estimate the cash flows that the company is expected to generate in the future and the discount rate required by investors. The estimated cash flows can be based on historical performance, future growth projections, and other relevant factors. The discount rate can be estimated using the company's cost of capital, the risk-free rate, and other market-related factors.
Keep in mind that this is just one method for estimating the intrinsic value of a company's stock, and there are other factors to consider when evaluating a company's stock price, such as its financial health, competitive landscape, and market trends
