Intrinsic value

Intrinsic value is an estimate of what a company is actually worth based on its underlying business fundamentals, such as its cash flows and growth prospects, independent of what its stock happens to be trading for at any given moment. Value investors compare a stock's market price to their estimate of intrinsic value to judge whether it looks cheap or expensive.

Intrinsic value is always an estimate rather than a precise, provable number, since it depends on assumptions about the future. A DCF model is one common method for arriving at an intrinsic value estimate, producing a fair value per share that can then be compared to the current market price.