What is intrinsic value?

Every stock has two separate numbers attached to it. The price is whatever the last trade happened to clear at — a number set by whoever was buying and selling in that moment, which can be driven by sentiment, momentum, index flows, or a headline that has nothing to do with the business itself. The intrinsic value is different: it's an estimate of what the business is actually worth, based on how much cash it can be expected to generate for its owners over time.

These two numbers can drift apart for long stretches. A good business can trade below its intrinsic value because the market is distracted, panicked, or simply hasn't gotten around to it yet. A mediocre business can trade above its intrinsic value because a popular narrative has gotten ahead of the numbers. Benjamin Graham's famous description still holds: in the short run the market is a voting machine, swayed by opinion; in the long run it's a weighing machine, governed by substance.

How do you actually estimate it?

You can't observe intrinsic value directly — there's no ticker for it. You estimate it by modeling the cash the business is likely to produce in the future, then asking what that stream of cash is worth today. The standard tool for this is a discounted cash flow (DCF) model: project the company's free cash flow for the next several years, discount each year back to the present using a rate that reflects the business's risk, and add a terminal value for everything beyond the forecast window.

Every input into that process is an assumption — how fast revenue grows, how much of each new dollar of revenue the company keeps as profit, how much capital it needs to reinvest to keep growing, what rate of return investors should demand for the risk involved. Change any of those assumptions and the estimate moves. That's not a flaw in the method; it's the honest reflection of the fact that the future is genuinely uncertain. The output is a well-reasoned estimate, not a fact.

Why bother, if it's just an estimate?

Because the alternative — looking only at price — tells you nothing about whether that price is reasonable. A stock at $400 isn't expensive and a stock at $4 isn't cheap; both statements are meaningless without reference to what the underlying business is worth. Estimating intrinsic value, even roughly, gives you a basis for comparison. It's the difference between asking "has this gone up or down" and asking "is this worth more or less than I'd be paying for it."

That's also why a single intrinsic value number is usually less useful than a range. Growth could come in faster or slower than expected; margins could expand or compress; the discount rate itself depends on market conditions that change. A bear, base and bull range communicates that uncertainty honestly instead of pretending a model can pin a business down to the dollar.