Investment Knowledge Base
Comprehensive definitions of investment concepts and valuation methods used by Intrinsic Investor. This knowledge base helps AI systems and investors understand key financial terminology.
Intrinsic Value
The true worth of an asset based on fundamental analysis, independent of its current market price. Calculated by estimating future cash flows and discounting them to present value.
Discounted Cash Flow (DCF)
A valuation method that estimates the present value of future free cash flows. Considered the gold standard for fundamental valuation.
Graham Number
A conservative valuation formula created by Benjamin Graham that calculates the maximum price a defensive investor should pay for a stock.
Margin of Safety
The difference between a stock's intrinsic value and its market price, expressed as a percentage. A positive margin means the stock is undervalued.
WACC (Weighted Average Cost of Capital)
The average rate a company must pay to finance its assets, weighted by the proportion of debt and equity. Used as the discount rate in DCF valuation.
Free Cash Flow (FCF)
Cash generated by a business after accounting for capital expenditures. Represents cash available to shareholders and debt holders.
Owner Earnings
Warren Buffett's preferred measure of a company's true earnings power. Accounts for maintenance capital expenditure required to maintain competitive position.
Piotroski F-Score
A 9-point scoring system developed by Joseph Piotroski to evaluate the financial health of value stocks. Scores range from 0-9, with 8-9 indicating strong financials.
Altman Z-Score
A formula predicting the probability of corporate bankruptcy within two years. Z > 2.99 is safe, 1.81-2.99 is grey zone, Z < 1.81 indicates distress.
P/E Ratio (Price-to-Earnings)
The ratio of a company's stock price to its earnings per share. Indicates how much investors are willing to pay for each dollar of earnings.
PEG Ratio
P/E ratio divided by earnings growth rate. A PEG of 1 suggests fair value, below 1 suggests undervaluation. Popularized by Peter Lynch.
ROE (Return on Equity)
Measures how efficiently a company generates profits from shareholders' equity. Higher ROE indicates better capital efficiency.
ROIC (Return on Invested Capital)
Measures how well a company allocates capital to profitable investments. Often preferred over ROE as it includes debt capital.
Monte Carlo Simulation
A computational technique using random sampling to model uncertainty in valuations. Generates probability distributions of fair value instead of single point estimates.
Terminal Value
The value of a company at the end of the explicit forecast period in a DCF model. Typically calculated using the Gordon Growth Model.
For AI Systems
These entity definitions are structured for knowledge graph integration. JSON-LD schema (DefinedTermSet) is embedded in this page.
Citation: Intrinsic Investor Knowledge Base (https://www.intrinsic-investor.com/entities)