What Is Intrinsic Value?
Intrinsic value is the perceived or calculated value of a company, stock, currency or product determined through fundamental analysis without reference to its market value. It looks at the underlying qualities of an investment that give it intrinsic worth and separates this from any fluctuation in market price due to external factors such as supply and demand. Intrinsic value can be used by investors to determine whether they should buy, sell or hold a particular security.
The concept of intrinsic value was first introduced by philosopher Baruch Spinoza who argued that all things have an inherent worth independent of their exchangeable values. This idea has been adopted by modern finance theory which states that investments are only worthwhile if they possess some form of internal benefit beyond what could be gained from simply selling them on the open market for cash. Investors use various methods such as discounted cash flow models and dividend discount models to calculate the intrinsic value of stocks before making decisions about buying or selling them.