Intrinsic value
Under the intrinsic value ( English intrinsic value ) or fair value ( English fair value ) is understood in the financial analysis , in particular the fundamental analysis , the value of a company , a security or a financial instrument , of this due to accounting rule works z (. B. HGB or IFRS ) is attributed ("reasonable value").
General
The intrinsic value can differ from the stock exchange price , market value or market value at which the security is currently traded on the stock exchange. While the market value results from supply and demand , the intrinsic value is the result of a mathematical calculation or forecast.
This concept can also be applied to any other economic good , to ecological resources and to material and immaterial values.
If a market value is below the intrinsic value, one speaks of undervaluation ( English underperformance ), in the opposite case of overvaluation ( English overperformance ).
In relation to options , the term “intrinsic value” has a specific meaning which is explained below.
Intrinsic value of company shares
There are different methods to the fair value of a company and its shares (eg shares to calculate) (see company valuation and net asset value ). Most of them can be assigned to fundamental analysis , i.e. the study of business data and general economic conditions. Since the different methods lead to different results, one cannot speak of an absolute intrinsic value for companies, but only of a valuation range (see also: price target ). The reliability of the assessment can be increased by combining several analysis methods.
In complex conglomerates , their stock market value is often below a theoretical intrinsic value. This difference is called the conglomerate discount.
Intrinsic value of options
The intrinsic value of a call option is equal to the difference between the current price of the underlying and the strike price, multiplied by the option ratio. The intrinsic value of a put option is according to the difference between the base price and the current price of the underlying multiplied by the ratio option.
In the case of options that can be exercised at any time ( American option ), the intrinsic value is always at most as high as the theoretical value. If the early exercise of the option is not possible ( European option ), the intrinsic value can also be higher than the theoretical value.
The theoretical value of options is calculated with the help of option price models, see option price theory .
Efficiency of financial markets
There is extensive academic debate about the relationship between intrinsic value and market value. The market efficiency hypothesis assumes that the market values in financial markets are always equal to the intrinsic values. There are practical counterexamples for this in the form of documented market inefficiencies, for example from the time of the New Market . In addition, it remains unclear what intrinsic value is meant here in view of the various evaluation methods.
The theory of behavioral finance provides psychological and sociological explanations for the observed differences between market value and intrinsic values.
The strategy of value investing and the applicability of fundamental analysis are based on the assumption that the market value of a security will approach a fair value with a certain probability and within a more or less long period of time. Value investors see the success of investors like Warren Buffett as proof of this hypothesis .
Intrinsic value of coins
In numismatics , the “intrinsic value” is the metal value of coins , in contrast to the imprinted face value .
literature
- Simon Cottle, Roger Murray, Frank Block: Graham and Dodd's Security Analysis . 5th edition. McGraw-Hill, 1988, ISBN 978-0-07-013235-1 (English).
Individual evidence
- ^ A b Simon Cottle, Roger Murray, Frank Block: Graham and Dodd's Security Analysis . 5th edition. McGraw-Hill, 1988, ISBN 978-0-07-013235-1 , pp. 41 ff . (English).
- ^ Wilhelm Schmeisser: Corporate Finance and Risk Management . Oldenbourg Wissenschaftsverlag, 2010, ISBN 978-3-486-59752-3 , p. 174 ff .
- ^ Franz-Joseph Busse: Fundamentals of operational finance . Oldenbourg Wissenschaftsverlag, 2003, ISBN 978-3-486-25406-8 , pp. 523 ff .