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How To Find The Intrinsic Value Of A Share/Stock? (#14)

 



How to Find the Intrinsic Value of a Share/Stock

You can't really do Value Investing without calculating a share's intrinsic value — so today, let's walk through exactly how that's done.

→ Related: What Is Value Investing?(#13)

If you've come across the formula before and found it confusing — you're not alone. I found it genuinely difficult to make sense of at first too, but it clicked once I actually walked through a real example. By the end of this article, it should click for you too.

Note: the information here is based on independent research and may not be 100% accurate. Nothing here is a recommendation — anyone using this formula to make an investment decision is responsible for their own outcome.

Benjamin Graham, author of The Intelligent Investor, is credited with this particular formula for estimating a share's intrinsic value.

One important caveat before we start: finding a share's intrinsic value is just one part of value investing — not the whole process. A share trading below its calculated intrinsic value isn't an automatic buy signal. You still need conviction in the company itself, and ideally, a real understanding of the business you're investing in.

The Formula

Intrinsic Value = [EPS × (8.5 + 2g) × 4.4] / Y

It looks intimidating, but it breaks down into three inputs:

  • EPS = Earnings Per Share
  • g = the company's estimated growth rate
  • Y = the current AAA Corporate Bond Yield (a proxy for a "safe" long-term interest rate)

You can find EPS and a company's growth rate through most stock screeners — I use TradingView, a solid free option (no sponsorship here, it's just what I personally use). The AAA bond yield for your country is easy to find with a quick search.

Worked Example: Reliance Industries

Let's calculate the intrinsic value of Reliance Industries using current figures (as of mid-2026):

  • EPS = ₹59.69 (FY 2025–26 full-year earnings)
  • g = 8% (Reliance's average EPS growth rate over the past few years)
  • Y = 7.5% (approximate current AAA corporate bond yield in India)

Plugging these in:

[59.69 × (8.5 + 2×8) × 4.4] / 7.5

[59.69 × 24.5 × 4.4] / 7.5

≈ ₹858

So, by this formula, Reliance's estimated intrinsic value comes out to roughly ₹858. Reliance's actual share price as of mid-2026 has been trading well above that — in the ₹1,450–1,480 range — which would suggest the stock is significantly overvalued by this particular measure.

Worth knowing: this gap is a good illustration of the formula's real limitation. Graham's formula was designed in a different market era, and it tends to be quite conservative — especially for large, capital-intensive, moderate-growth companies like Reliance, which spans oil & gas, retail, and telecom rather than fitting neatly into a single growth profile. Small changes to the growth rate (g) also swing the result significantly, since it's doubled in the formula. Even Graham himself, later in life, cautioned against leaning too heavily on any single formula in isolation — it's a useful reference point, not a precise verdict.

That's exactly why this calculation is meant to be one input among several, not a standalone buy/sell signal.

The Takeaway

This is how you can estimate the intrinsic value of any company's share using Graham's formula. That said, the result should be treated as a rough estimate rather than a precise figure — it depends heavily on your growth rate assumption, and different data sources can give you slightly different EPS or growth figures to start with.

Remember: intrinsic value is just one piece of value investing. Understanding the underlying business — its financials, its competitive position, and its future outlook — matters just as much, if not more.

→ Related: What Is Value Investing?(#13)

Hopefully this gives you a clearer sense of how the intrinsic value formula actually works in practice. Thanks for reading.

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