intrinsic value


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Related to intrinsic value: Extrinsic value

Intrinsic value

The value of an option if it were to expire immediately with the underlying stock at its current price; the amount by which an option is in-the-money. For call options, this is the difference between the stock price and the strike price, if that difference is a positive number, or zero otherwise. For put options it is the difference between the strike price and the stock price, if that difference is positive, and zero otherwise. See also: In-the-Money, Time Value Premium, Parity.

Intrinsic Value

1. The actual value of an asset. That is, the intrinsic value is what an asset is actually worth, rather than its current market value, which is overly influenced by market conditions such as a recession or a speculative bubble. One may think of the intrinsic value of an asset as its value "in a perfect world," because one may not always be able to receive the intrinsic value. For example, the intrinsic value of a baseball card may be $10,000, but if prevailing market conditions render investors uninterested in buying baseball cards, one may only be able to sell the card for $5,000. That said, the line between intrinsic and extrinsic value is sometimes blurry.

2. The gain that an option holder would receive by exercising an in-the-money option. That is, the intrinsic value of an option is how much the strike price is below the underlying asset (for a call) or above the underlying asset (for a put). These options have intrinsic value because they always result in a profit. As a result, these options may be sold for a much higher price than the investor paid for the option.

intrinsic value

The value of a security, justified by factors such as assets, dividends, earnings, and management quality. Intrinsic value is at the core of fundamental analysis since it is used in an attempt to calculate the value for an individual stock and then compare it with the market price. Because analysts view facts differently, there is often a wide disparity in estimates of a particular stock's intrinsic value.

Intrinsic value.

A company's intrinsic value, or underlying value, is used to calculate its projected worth.

You determine intrinsic value by subtracting long-term debt from anticipated future assets, including profits, the potential for increased efficiency, and the sale of new stock.

Another approach is to calculate intrinsic value by dividing the company's estimated future earnings by the number of its existing shares. This method weighs the current price of a stock against its future worth.

Critics of using intrinsic worth as a way to evaluate potential investments point out that all the numbers except debt are hypothetical.

The term is also used in options trading to indicate the amount by which an option is in-the-money. For example, an equity call option with a strike price of 35 has an intrinsic value of $4 if the market price of the underlying stock is $39. But if the market price drops to $34, the option has no intrinsic value.

intrinsic value

An appraisal term meaning an intangible value based on a property's proximity to certain features and amenities, such as good schools, health care, and shopping.

References in periodicals archive ?
Using this multiplier against trailing earnings per share of Megaworld at P0.44, we can derive the intrinsic value of the stock at P10.9, which offers a huge 56 percent discount to its current share price.
To know the intrinsic value of a company or a capital investment, we must accurately and instantaneously process all information about it--and know every thing that might prevail in the future and the precise probability of each potential event actually occurring, as well as the cash flow consequences associated with these events.
4) emphasizes that "the notion of intrinsic value is not subjective but generic [...] In the absolute sense, intrinsic value is the real worth of a company, the sale price investors could reasonably place on the company if they all possessed the same information and insight" (italics added).
If something has intrinsic value, its does not depend on my valuing it.
Information content and amount of common factors are set at quite small values to keep stocks' intrinsic values within a reasonable magnitude.
Intrinsic value is calculated according to equation (4) with adjusted net income in the residual income calculation:
All the world's particulars can be ordered in a continuous scale of decreasing similarity to the particulars whose intrinsic value is intuitively obvious.
" There is something called intrinsic value of the rupee.
Each stock in the S&P GIVI is weighted by its calculated intrinsic value. The intrinsic value of each stock is the sum of two components: the value of assets in place plus the value of growth opportunities.
Minteer admits that Dewey's vision is ultimately humanistic, but he believes that it captures much of what motivates a search for non-instrumental intrinsic value. We can be pragmatists and still experience awe and humility towards nature.
We find that equity in high-reputation underwriter backed IPOs is priced higher and further away from intrinsic value than that in low-reputation underwriter backed IPOs.
The penultimate responsibility of every CFO is to drive the underlying "intrinsic value" of the firm.

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