Do stocks have known and “provable” intrinsic values, or might different people reach different conclusions about intrinsic values? Explain.

Do stocks have known and “provable” intrinsic values, or might different people reach different conclusions about intrinsic values? Explain.

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January 1, 2021
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Do stocks have known and “provable” intrinsic values, or might different people reach different conclusions about intrinsic values? Explain.

 

Answer and ExplanationSolution by a verified expert

Here is a tip:

There is no single formula for determining intrinsic value.

Explanation

Intrinsic value is a core matrix that is used by analysts and investors to value a company. To calculate intrinsic value, an analyst estimates future cash flows and risk of the security based on his/her knowledge. This estimate can be different from analyst to analyst because of the information available and the methodology used to determine a fair value. That's why different people can have different intrinsic values.

Verified Answer

Intrinsic value is an estimated value of a stock based on future cash flows and risks. Different people can have different estimates of intrinsic values for the same stock.

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