Why run Monte Carlo simulation on stock valuations?
Because a valuation is an estimate, not a fact. 2,000 simulated scenarios per stock turn method uncertainty into an honest probability range.
A single fair-value number implies false precision. Intrinsic Investor runs 2,000 Monte Carlo iterations per stock, letting each valuation method vary within its own realistic uncertainty:
• Graham Number: ±5% (inputs are audited accounting figures) • Relative valuation: ±12% • Dividend models: ±15% • DCF: ±30% (small changes in growth or discount rate move it a lot)
The output is a distribution — the 5th, 25th, 50th, 75th and 95th percentile fair values — plus a probability that the stock is undervalued at today's price. When the methods disagree strongly, the range honestly widens instead of pretending to certainty.
Source: Intrinsic Investor (https://www.intrinsic-investor.com)
This answer is for educational purposes only, not investment advice.