Intrinsic Value
Calculate the intrinsic value of a stock using Benjamin Graham's DCF-based formula. Estimate fair stock price based on EPS, growth rate, and AAA bond yield with margin of safety analysis.
About This Calculator
The Intrinsic Value Calculator helps value investors determine the fair price of a stock using Benjamin Graham's revised valuation formula. Whether you are a beginner investor learning value investing principles or an experienced portfolio manager screening for undervalued stocks, this calculator provides a quick and reliable estimate of a stock's fundamental worth based on earnings per share (EPS), expected growth rate, and prevailing AAA corporate bond yields.
The calculator uses the Benjamin Graham formula: V = EPS × (8.5 + 2g) × (4.4 / Y), where V is the intrinsic value per share, EPS is trailing twelve months earnings per share, g is the expected annual growth rate for the next 7-10 years, 8.5 is Graham's base P/E ratio for a zero-growth stock, 4.4 represents the AAA corporate bond yield in 1962, and Y is the current AAA corporate bond yield. The formula also calculates the margin of safety as a percentage difference between intrinsic value and current market price, helping you determine whether a stock is undervalued or overvalued.
Benjamin Graham, often called the father of value investing, introduced this formula in his book Security Analysis (1934) and later revised it in The Intelligent Investor. The formula is designed for growth stocks and provides a conservative estimate of intrinsic value. The built-in adjustment factor (4.4 / Y) allows the formula to remain relevant across different interest rate environments by comparing current AAA bond yields against Graham's benchmark of 4.4% from 1962.
Regional Notes
India: Indian investors should use AAA-rated corporate bond yields from CRISIL or ICRA. Current AAA yields in India typically range between 7-8%. The formula works well for large-cap Indian stocks with consistent earnings growth.
United States: Use the Moodys Seasoned Aaa Corporate Bond Yield (currently ~5.87% as of Jul 2026) from the Federal Reserve H.15 report. This formula is particularly relevant for US value investors following Graham's original methodology.
United Kingdom: UK investors should use AAA-rated corporate bond yields from the Bank of England or FTSE UK AAA Index. UK AAA yields typically align closely with US rates adjusted for currency and inflation differentials.
Frequently Asked Questions
What is intrinsic value of a stock?
Intrinsic value is the true or fundamental worth of a company's stock based on its earnings, growth prospects, and financial health. It represents what a rational investor would pay for the stock based on its fundamentals rather than market sentiment. Benjamin Graham, the father of value investing, pioneered the concept of intrinsic value to identify undervalued stocks for long-term investment.
How is intrinsic value calculated using the Benjamin Graham formula?
The Benjamin Graham formula calculates intrinsic value as V = EPS × (8.5 + 2g) × (4.4 / Y), where EPS is earnings per share, g is the expected annual growth rate (%), 8.5 is the base P/E ratio for a zero-growth stock, 4.4 represents the AAA corporate bond yield in 1962, and Y is the current AAA corporate bond yield. This formula adjusts the base valuation for growth and current market conditions.
What is a good margin of safety for stock investing?
A margin of safety between 20% and 50% is generally recommended for stock investing. This means buying a stock when its market price is 20% to 50% below its calculated intrinsic value. The margin of safety provides a cushion against errors in valuation estimates and unforeseen market downturns. Conservative investors typically prefer a higher margin of safety, while aggressive investors may accept lower margins.
What inputs does the intrinsic value calculator need?
The intrinsic value calculator requires four inputs: earnings per share (EPS) from the trailing twelve months, the company's expected annual growth rate for the next 7-10 years, the current AAA corporate bond yield as a risk-free benchmark rate, and the current market price (CMP) of the stock to calculate the margin of safety.
Is the Benjamin Graham formula still relevant today?
Yes, the Benjamin Graham formula remains relevant as a conservative valuation tool for growth stocks. While originally developed in the 1970s, the formula's adjustment factor (4.4 / Y) allows it to adapt to changing interest rate environments. Many value investors still use it as a quick preliminary screen to identify potentially undervalued stocks before conducting more detailed fundamental analysis.
How do I find the AAA corporate bond yield for my region?
In the United States, you can find the AAA corporate bond yield from the Federal Reserve's H.15 report or financial data sites like YCharts and Bloomberg. As of July 2026, the Moody's Seasoned Aaa Corporate Bond Yield is approximately 5.87%. In India, use the AAA-rated corporate bond yield from sources like the RBI or CRISIL. In the UK, check AAA-rated corporate bond yields from the Bank of England or FTSE Russell.
What does the status result mean?
The status result categorizes the stock's valuation: Undervalued (margin of safety above 20%) suggests the stock is trading well below fair value and may be a buy opportunity. Slightly Undervalued (0-20%) indicates a modest discount. Slightly Overvalued (0 to -20%) suggests the stock trades above fair value. Overvalued (below -20%) means the stock is significantly overpriced and may be best avoided until the price corrects.