Warren Buffet’s Intrinsic Value Formula

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Warren Buffett regularly mentions that he uses a formula to calculate the intrinsic value of a company before deciding whether or not to invest in it. How exactly he works out this formula, is not straightforward and quick as many factors and company fundamentals are taken into account. Roughly speaking he multiplies the estimated future earnings of a company by a confidence margin between zero and a hundred percent. He then compares these probable earnings with something he has total confidence in, by using a U.S. treasury yield as his discount rate.

There is a relatively new website called Simply Wall Street, which takes the guesswork and hard slog out of researching a companies intrinsic value. This incredibly simple to use site has transformed company analysis by making the facts and figures visually appealing in a simplistic and colourful way.

Simply Wall Street Visual Warren Buffett Formula Intrinsic Value

This is the next best thing to an automated formula. It is kept updated with real-time stock price data, which has calculated whether the company is currently over or under valued.

As you can see in this simple to understand image Halfords is currently slightly undervalued:

Halfords Share Price is Currently Undervalued
Halfords Share Price is Currently Undervalued

 

And Sky is currently overvalued:

Sky Share Price is Currently Overvalued
Sky Share Price is Currently Overvalued

 

This website is a fabulous addition to any long term investors tool box of research tools. There is a free trial that lasts 14 days and then Simply Wall Street offers a selection of paid plans. The Investor Plan is £60 per year and the Pro Plan is £225 per year. https://simplywall.st/plans

Visit Simply Wall St

 

 

Paul Maplesden, a freelance writer and investor, is so impressed by the Simply Wall Street website that he has pledged to invest $30,000 in an experiment testing it out as the basis of his investment decisions. “Since I found Simply Wall Street last year, I’ve been impressed with how the site simplifies and presents information and it seems like an ideal place to begin my new investing journey.” said Paul.

Trust Pilot Trusted Reviews provide excellent feedback on this fast growing site. It is “Very powerful with easy and comprehensive studies, reports and prognoses on thousands of companies with up to date analysis. This provides a great opportunity for beginner and intermediate investors to manage your own capital and long term investments with ease and confidence.”

 

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