What is a company actually worth, apart from its price?
You already know how to read a company's statements. Now we ask the hardest question in all of investing: what is the whole thing worth? Not what the market is charging for it today — what it is worth, on its own merits.
Price is a vote; value is a weighing
The share price you see is a live tally of what buyers and sellers will trade at right now. It reflects moods, headlines, and flows as much as facts. Intrinsic value is different — it is an estimate of what the business is worth based on the cash it can be expected to generate over its life, for whoever owns it.
The classic one-liner: in the short run the market is a voting machine, in the long run a weighing machine. Price is the vote. Intrinsic value is your attempt at the weight.
The one idea underneath everything
A business is worth the cash it will hand its owners in the future — every future year — restated into today's money. That is the entire theory of a discounted cash flow (DCF) model. Everything else in this course is machinery for estimating those two things:
- How much cash, and for how long?
- How much less is future cash worth than cash in hand today?
Notice what is not in that sentence: the share price. A DCF is built from the business, then compared with the price afterward. That order matters, and we will protect it all course.
A first taste with rounded numbers
Suppose a small company will produce about €100 of owner cash next year, growing slowly, forever. If a euro a year from now is worth a bit less than a euro today, all those shrinking future euros still add up to a finite number — say, roughly €1,400 of value. That €1,400 is an estimate of intrinsic value. Whether the market prices the company at €1,000 or €2,000 is a separate fact you compare against it.
A gap between the two is an observation, never an instruction. "Value above price" is not "buy" — it means your assumptions imply more value than the market is paying, and the honest next step is to ask which of us is wrong, and why.
In the data
The price tag first, the market's live valuation of Apple's equity:
And the business underneath it, from a closed fiscal period:
Market capitalisation moves with every trade in the shares. The cash flow figures belong to a fiscal year that has ended and only became public on the day the company filed. So the comparison is always between a number from today and a number from a closed period, which is fine as long as you say so.
Try it now
- Read the market capitalisation. That is what the market is charging for the equity today. (The price tag for the whole business is enterprise value, which Unit 4 assembles.)
- Divide it by last year's operating cash flow. That number is how many years of cash like that the price implies, undiscounted. Say it out loud — it is usually larger than people expect.
- Notice what you just did. You compared a number from today against a number from a closed period that only became public on its filing date, which is fine as long as you say so. Nothing else in this course will be cleaner than that.
- Write one sentence separating the two ideas: "The market is pricing this at X; whether that equals its worth depends on the cash it produces from here." You have just drawn the line this whole course lives on. Then do it once more for a company of your own. Both numbers are on the fundamentals tab in the Terminal; the link opens Coca-Cola, and you change the symbol to the company you follow:
Open KO.US — fundamentals in the EODHD Terminal
A note on what we do here. EODHD Academy teaches how valuation works. Nothing here is a recommendation to buy or sell anything. Tickers are illustrations; a DCF is a way to make your assumptions visible, not a forecast of price.