How to Calculate the Intrinsic Value of a Stock like Benjamin Graham! (Step by Step)

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In this video, I take you step by step on how to calculate the intrinsic value of a stock using the formula created by Benjamin Graham and made popular by the book, "The Intelligent Investor." This formula has been used by many famous investors, including Warren Buffett.

*Important Update - I might a slight error on the margin of safety portion of this video. In order to see the correct way to apply a margin of safety, please watch this video:

How to Apply a Margin of Safety like Benjamin Graham! (Margin of Safety Explained + Example)

I am not a Financial advisor or licensed professional. Nothing I say or produce on YouTube, or anywhere else, should be considered as advice. All content is for educational purposes only. I am not responsible for any financial losses or gains. Invest and trade at your own risk.

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#IntrinsicValue #BenjaminGraham #StockValuation

[Dividendology]

*Important Update - I might a slight error on the margin of safety portion of this video. In order to see the correct way to apply a margin of safety, please watch this video:

How to Apply a Margin of Safety like Benjamin Graham! (Margin of Safety Explained + Example)

[MrNintoku]

11:03 I think this is an error since no matter what you have as your Intrinsic and Acceptable buy price as long as the margin of safety is below 100 it will always say Buy. I am assuming here that the comparison should be between current price and acceptable buy price.

If Current Price<Acceptable, "Buy", "Don't Buy"

[dudemanbrotime-financetech]

Finally someone whos not speculating/gambling

[larryyang]

Great content! Based on this same formula, apple intrinsic value is only $142 as of 02.18.2023. Apparently the growth rate cannot catch up to the corporate bond rate and the eps stays same. Now I understand why these once hot stocks are not hot anymore during inflation. Great formula. Thanks for bringing this to me!

[zaiho]

This is a great video; thank you. However, I think there's an error calculating the Acceptable Buy Price using the Margin of Safety (MoS).
If a 65% MoS for AAPL is 252.26 (388.09 x 65%), which means we want more protection; then the Acceptable Buy Price = Intrinsic Value - MoS of 65% = 135.83 (388.09 - 252.26 = 135.83).
Let's say we would accept less MoS for AAPL, which means we are more confident about the company and accepting less protection. A 35% MoS is 135.83 (388.09 x 35%). So, the Acceptable Buy Price would be 252.26 (388.09 - 135.83 = 252.26). Therefore, a 35% MoS (low MoS) would result in a low Acceptable Buy Price (252.26), and a 65% MoS (high MoS) would result in a much, much lower Acceptable Buy Price (135.83).
In contrast, the video shows that a 65% MoS has an Acceptable Buy Price of 252.26.

[swapnilhirave]

Great content. Acceptable buy price must be greater than Current Price for decision on "Buy", as 'Acc. (10:20) Buy price' is factored from intrinsic value itself. Need to correct this in model 1.

[davidoneill]

Very helpful, but the Buy/Sell formula should compare acceptable buy price to current price

[thefantorangster]

Grahams gormula is fairly accurate, it’s just that 17% growth rate is a redicilous prediction.

[sanziocaroli]

Just my 2 cents, if growth rate is 17.93%, you have to put 0.1793 in the formula, not 17.93, in other words, if a number is expressed in percent, you have to divide percent.

[sridevipanyam]

AT 10:55 the buy/sell recommendation logic should be if the price of the share is less than acceptable buy price.

[kegomania]

Warren Buffet doesn't use this. He uses a version of this that uses free cash flow. He doesn't like to use earnings because EPS can be manipulated by management.

[SonnyBB]

the growth rate express in percentage should be computed as percentage, so the intrinsic value is only around 75

[jumboegg]

3 years later, current price AAPL is $220.91 USD

[husseinalaaref]

In the IF statement, the first parameter should be (current price < acceptable buy price)
not (acceptable buy price < intrinsic value).
Thank you.

[schwingtrader]

Very helpful, 65% margin of safety is crazy. Gotta be careful with growth rates…AAPL will not be growing 17% annually over the next 5 years so getting accurate data is crucial. Best to look at multiple sources and average them.

[mikatu]

Thanks a lot. It was very well explained.
I also find that the original formula is too agressive.
I just think you shouldn't say buy vs sell, because the goal is not being selling stock simply because the market is not there. You should keep your stock if you believe in it. You should put buy vs not buy.
To decide if you want to sell you should create a different model, where you incorporate your "pain-level".

[ozeromd]

Video is well explained. But you could have added that Graham did actually implement two warnings in a footnote that Growth Rates are unpredictable and therefore the formula is basically not very meaningful at all.

[obijuan]

Great Job! Simple explanations, easy to understand. Now I just have to evaluate 4000 stocks…😊

[fluffyscruffy]

If the Growth Rate is a percentage, shouldnt it be listed in decimals? i.e. 0.1793?

[daktrdre]

15:43 =IF(I30<I33, "buy", "sell") thus current price is compared to the accep. buy price,
but in the original formula, you are comparing the acc. buy price to the intrinsic value F29<F23, thus the buy/sell signal is not the same between the formulas 10:30