Intrinsic Value
Definition
The true, inherent worth of an asset based on objective analysis, independent of its current market price.
Explanation
Intrinsic value is the central concept of value investing. Benjamin Graham defined it as the value that would be established by an all-knowing analyst with access to all present and future facts. In practice, intrinsic value is estimated through discounted cash flow analysis, asset-based valuation, or sum-of-the-parts analysis. The margin of safety — buying well below estimated intrinsic value — protects against estimation errors. If you estimate intrinsic value at $100 per share, buying at $65 provides a 35% margin of safety.