*Important Update - I might a slight error on the margin of safety portion of this video. In order to see the correct way to apply a margin of safety, please watch this video: How to Apply a Margin of Safety like Benjamin Graham! (Margin of Safety Explained + Example) ruclips.net/video/BysGX3ZgLFU/видео.html
as you said, in revised scenario as well, acceptable buy price is less than intrinsic value but how cone its sell option?? or the formula should be current price < acceptable buy price???
Oh thanks ... been spinning my wheels for half an hour trying to unwind what my discrepancy was! I was going to comment, but you've already found the problem.
This video is amazing! nice job! do you know if there is a way to manually calculate your own growth rate pulling the historical data into the sheet? many tks! PS: I made a concatenate function that actually gives the complete yahoofinance link straight into the analysis tab.. easy but effective since you click on the cell and the page magically opens in the right place. scroll down, boom, done.
11:03 I think this is an error since no matter what you have as your Intrinsic and Acceptable buy price as long as the margin of safety is below 100 it will always say Buy. I am assuming here that the comparison should be between current price and acceptable buy price. If Current Price
Yeah, you're right. He should be comparing the estimated intrinsic value to the actual current share price in F26. Also, in reality, you probably wouldn't wait to sell until the stock goes 65% above its intrinsic value. If you sell if it goes say 20% above intrinsic value then the condition should be something like: IF (F26 < F29, “Buy”, IF (F26>(F23*1.2), “Sell”)
I believe that's correct as well. I also noted that the "Difference" calculation is not used in the buy/sell determination. Perhaps it's just an interesting statistic.
@@firsargentum5920 this is to decide rather to buy or not. Once you buy you shouldn’t be looking to sell if you have done your homework for that company.
@@brandyharding7692 You can also use it as a guide to sell if you think the rationale for buying not longer holds, one of which could be that the stock has run up too much and has become overvalued. In any case, the substantive point is that the formula he gave for deciding on the Buy decision is wrong - I'm sure the OP understands the math and probably just effectively made a "typo" :)
Great content! Based on this same formula, apple intrinsic value is only $142 as of 02.18.2023. Apparently the growth rate cannot catch up to the corporate bond rate and the eps stays same. Now I understand why these once hot stocks are not hot anymore during inflation. Great formula. Thanks for bringing this to me!
@@jle92708 speculation Is a term used in investing to distinguish a value approach based on the analysis of a businesses financials. Speculation is reviewing the stock charge and betting that it will go I do agree that investing requires speculation, though taking a value approach and deeply analyzing a business is using realized data to make more accurate predictions. There are no guarantees of course, but there ways to invest that isn’t just placing a bet because you feel like you can make money
Great content. Acceptable buy price must be greater than Current Price for decision on "Buy", as 'Acc. (10:20) Buy price' is factored from intrinsic value itself. Need to correct this in model 1.
This is a great video; thank you. However, I think there's an error calculating the Acceptable Buy Price using the Margin of Safety (MoS). If a 65% MoS for AAPL is 252.26 (388.09 x 65%), which means we want more protection; then the Acceptable Buy Price = Intrinsic Value - MoS of 65% = 135.83 (388.09 - 252.26 = 135.83). Let's say we would accept less MoS for AAPL, which means we are more confident about the company and accepting less protection. A 35% MoS is 135.83 (388.09 x 35%). So, the Acceptable Buy Price would be 252.26 (388.09 - 135.83 = 252.26). Therefore, a 35% MoS (low MoS) would result in a low Acceptable Buy Price (252.26), and a 65% MoS (high MoS) would result in a much, much lower Acceptable Buy Price (135.83). In contrast, the video shows that a 65% MoS has an Acceptable Buy Price of 252.26.
It's funny that the entire valuation is based on "expected growth rate over 5 years" which is forecast by a group of investors. My concern is that there is a massive reliance on other people's idea on the shares future value. Would have thought that this reliance defeats the entire point of the valuation. Can anyone confirm how this 5 year growth rate is calculated by the brains trust?
Hello! if I want to calculate a stock bases in Mexico the Average yield aaa bond changes and what else? Besides the obvious. And the value should be in mexican pesos or us dollars?
Warren Buffet doesn't use this. He uses a version of this that uses free cash flow. He doesn't like to use earnings because EPS can be manipulated by management.
@FakeSparrow-lu5ih unfortunately it's a well kept secret by anyone who has the formula. They're unique to the individual depending on the formula. I suggest really diving in and learning as much as you can about the topic. But on our levels, his quote "buy good companies and do nothing" works well.
Good evening. I have a question...is the 8.5 or 4.4, and the growth rate percentages? I noticed a lot of growth rates are in percentages. For instance one growth estimate was 101.42 % So do I have to change that to 1.0142? Also, your examples, are 8.5 percentages? If they are do I need to change them to .085 or .044? i am really excited about this formula but just am confirming...especially with the growth estimate of 101.42...does that need to be changed or not. Thanks so much.
Are you sure at 10:50 in the video the Buy/Sell comparison is being done correctly? Should you be comparing the current price to the Acceptable Buy Price?
Thank you for the video! This helps me a lot! I have a question. If I am doing the calculations with a company that has a negative EPS, and I, therefore, get a negative intrinsic value, what should I do? This seems to throw off my results
Just my 2 cents, if growth rate is 17.93%, you have to put 0.1793 in the formula, not 17.93, in other words, if a number is expressed in percent, you have to divide percent.
In your formula for checking if the stock is buy or sell in 10:43, the answer will always be BUY because always will F29 be less than F23 because F29 is a product of percentage(Margin of error) to the F23. Is this formula really correct?
Thank you for this. I've wanted to find a IV calculator for Graham for a while. I now officially have three different methods for calculations!🤣 1. Multiple of earnings 2. Discounted Cash Flow and now 3. Grahams. However, since I follow so much of Graham's teachings I think I'll explore this model.
When you use these different methods of calculating IV, do they give close to the same results, or are there big differences between them? If there are big differences between them, which method do you think has turned out to be more accurate?
Thanks a lot. It was very well explained. I also find that the original formula is too agressive. I just think you shouldn't say buy vs sell, because the goal is not being selling stock simply because the market is not there. You should keep your stock if you believe in it. You should put buy vs not buy. To decide if you want to sell you should create a different model, where you incorporate your "pain-level".
you can just automate this. as per the formula, you can acutally lookup the EPS and other numbers. Download the Script names you want to analyze, and create a dropdown of the scipts. so everytime you select the script, it will give the IV. should not take more than an hour to create this for all 4000 stocks.
The „intrinsic“ value in Graham‘s book refers to the value of the company’s assets. That is: take all the assets (not including any non-tangibles) and add them up (take depreciation into account). deduct all liabilities and divide the total of both by the shares. this gives you the value of a share should the company have to be liquidated. remember that graham lived 1929. then include a 20% safety margin and then you have the value to compare the current price to. Obviously this does not carry as much weight anymore as tech companies have little assets compared to there intellectual properties. But it is a conservative way of valuation for production companies with little intellectual properties.
Hello @Dividendology. Could you please reveiw your formula here for buy/sell versus your video posted on margin of safety buy/sell formula and clarify. You use current
Thanks for the fine video. If 4.4% was used by B. Graham as the average AAA corporate bond rate, how old is that, and should it be updated and if so how? Thanks...
Just wondering.. In the Buy/Sell recommendation...should we compare Acceptable buy price with Current price ? in the video suggested at 10:57min.. its compared Acceptable buy price with Intrinisc value..
You need to apply some discipline on the units of the parameters in the model. For example, g is a %. It's better to plug in 0.1793 in Excel and format as %. A reality check - is a stock really worth $388 when it generates $5.11 per year?
(2x g(17%) growth) is a percentage shouldn't it be 2x .17 instead of 2x 17? Further, stocks trade at multiples so then you would need to apply a multiple to see the actual value now at 26 times earnings?
10:46 you make the buy or sell if statement: if the acceptable buy price is less than the intrinsic value buy else sell. But you calculated the acceptable buy price by multiplying 0.65 with the intrinsic value. Shouldn't it be: If current price is equal or smaller than acceptable buy price buy else sell??? I was very confused here. The way you put the buy/sell together it will always want to buy.
thanks for sharing. look, what bout the growth rate? you took the 5 years as example, but there is not time function on the equation. i believe it should be relevant if you take 3 , 5 or 10 right? or im missing something.? thanks
I think there is a mistake or im confused lol. Your acceptable buy price is .65*Intrinsic value. Which means that the buy price is always lower than intrinsic. So your last sell will always say "BUY". Shouldnt you compare to current price?
This is really well explained. Have you created one where you compare an individual stock intrinsic value to just buying an 8% ETF rather than bonds. They weren't around in Graham's time, otherwise I'd think he'd use this higher earning option to compare.
Video is well explained. But you could have added that Graham did actually implement two warnings in a footnote that Growth Rates are unpredictable and therefore the formula is basically not very meaningful at all.
Quick question for anyone with more grey matter upstairs than myself: ------------ They Buy/Sell formula seems to only look at acceptable buy price vs. intrinsic value. What if the current price is higher than acceptable buy price, but still lower than intrinsic value. Is there a way to use a formula (IFS for example) to list buy if: - Acceptable buy price is below intrinsic value AND - current price is belowe acceptable buy price ???
How often is the avg. yield AAA corporate bonds number updated? I was trying to find a current percentage and was able to find a current long term average yield of 6.51%. This is much different than the 4.4% listed in your video. What are your thoughts on this?
When I enter that formular for fetching the EPS, google spreedshet gives me the EPS as per the last available quarter, in my case 30 June 2023, and not the TTM. In your video, however, it seems to import the TTM EPS. What am I missing?
Got a question. Does this formula apply to non-US stocks. I have tried using this on Rolls Royce Holdings (RR) and I am getting a negative number? Mathematically that checks out since the EPS is negative. I am assuming don't buy would be the recommendation.
@@Dividendology Do you know how to in google sheets to get a companies EPS that is multiple listed E.g. Rio Tinto is listed on the US and ASX. Additionally would it be fine to make an assumption that the data would similar so just pick any?
Thanks for your video! What if the formula contains one negative number, per example the growth rate expected for the stock. In that scenario you will have a negative intrisic value, which is impossible...what should we do?
The video is great and I thank you for your hard work. However, the formula for to Buy/Sell condition is a bit confusing; an acceptable buy price should compare with the current price column I believe. I have watched this video several times. Let me know what you think.
I think you are correct, while copying the formulas on my own spreadsheet, based on the formulas the acceptable buy price should always be less than intrinsic value, hence always a buy What we want to know is: Is the CURRENT price an acceptable price to buy
Follow the model. If the market price is above the acceptable buy price (always the case if the acceptable buy price is negative) you don't buy the stock.
Hi! Just some questions out of curiosity. Why multiple average yield of bonds and divide current yield? I just want to know in what sense exactly this calculation is 'the' intrinsic value. By the way, Great lesson for beginner! Thank you! 😄
Is the Buy/Sell recommendation at the bottom supposed to be based on the Acceptable Buy Price and Current Price, or the Acceptable Buy Price and the Intrinsic Price? And is whether you Buy or Sell based on the Acceptable Buy Number?
The buy/sell recommendation is based on if the current price is below the acceptable buy price. The acceptable buy price is just the intrinsic value with a margin of safety. If the current price is below or equal to the acceptable buy number, then that is an indicator that it is likely a good time to buy the stock.
@@Dividendology I might be missing something, but the formula used in the video sets the Buy/Sell decision based on if the acceptable price is less than the intrinsic value and not the current price. Is that correct?
11:33 regarding that intrinisc value, maybe one should adjust it to stock splits, as APPL was valued at 400 tbefore the last 1:4 stock split, which would mean that the stock is far ivervalued
I don't see any calculation using the current price? So if the current price is higher than the intrinsic value and the acceptable price, you still should buy based on the acceptable price being lower than the intrinsic value?
In your If statement I could see Acceptable value is less that intrinsic value in both the graham's case then how come the new model shows sell can you give me the formula
Am I missing something here. When I plugin the numbers for AAPL it comes out pretty low compares to what it is trading at. 6.13 × (8 + 2(.13)) × 4.4 /4.5
great video! just the Buy/Sell part did not make sense. at 10:44, you mentioned if the acceptable price is lower than the intrinsic value (which always will be the case after applying the safety margin) then buy. Guess it should be if the acceptable price is higher than the current price then you should buy.
Great video !!! Thank you so much !! Wanted to ask if the “Y” is applicable in non us markets as well (I mean if I own a non us stock do I follow the same process to find the number you showed) and if the number “4,4” is always the same. Thanks again
Hi, just passed by your video, this formula does not work really well for stocks that have a low EPS, do you have an explanation? as an example, NVDIA current price is 267,58$ but with this formula his intrinsic value would be 46,93$
Hello, Thanks for the very interesting topic. According to the ChatGPT the value should be calculated by this formula: Intrinsic Value= SQRT ( (22.5 * EPS over last 3 to 5 years)/ 10-Year Treasury Yield) What do you mean about it? Regards
I THINK THERE IS ANOTHER ERROR IN THE PART OF THE FORM TO DECIDE WHETHER TO BUY OR SELL BECAUSE YOU CALCULATE IF THE ACCEPTABLE PRICE IS LOWER THAN THE INTRICATE BUY AND I THINK IT SHOULD BE IF THE CURRENT PRICE IS LOWER THAN THE ACCEPTABLE PRICE CAN YOU EXPLAIN IT?
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*Important Update - I might a slight error on the margin of safety portion of this video. In order to see the correct way to apply a margin of safety, please watch this video:
How to Apply a Margin of Safety like Benjamin Graham! (Margin of Safety Explained + Example)
ruclips.net/video/BysGX3ZgLFU/видео.html
as you said, in revised scenario as well, acceptable buy price is less than intrinsic value but how cone its sell option?? or the formula should be current price < acceptable buy price???
@@aneel139 correct formula at 15:38 , look at the formula box....
Oh thanks ... been spinning my wheels for half an hour trying to unwind what my discrepancy was! I was going to comment, but you've already found the problem.
the growth rate express in percentage should be computed as percentage, so the intrinsic value is only around 75
This video is amazing! nice job! do you know if there is a way to manually calculate your own growth rate pulling the historical data into the sheet? many tks!
PS: I made a concatenate function that actually gives the complete yahoofinance link straight into the analysis tab.. easy but effective since you click on the cell and the page magically opens in the right place. scroll down, boom, done.
11:03 I think this is an error since no matter what you have as your Intrinsic and Acceptable buy price as long as the margin of safety is below 100 it will always say Buy. I am assuming here that the comparison should be between current price and acceptable buy price.
If Current Price
this is what i was thinking too. at 13:22 the formula changes for "acceptable buy price" as well but i'm not sure if i'm missing something
Yeah, you're right. He should be comparing the estimated intrinsic value to the actual current share price in F26. Also, in reality, you probably wouldn't wait to sell until the stock goes 65% above its intrinsic value. If you sell if it goes say 20% above intrinsic value then the condition should be something like: IF (F26 < F29, “Buy”, IF (F26>(F23*1.2), “Sell”)
I believe that's correct as well. I also noted that the "Difference" calculation is not used in the buy/sell determination. Perhaps it's just an interesting statistic.
@@firsargentum5920 this is to decide rather to buy or not. Once you buy you shouldn’t be looking to sell if you have done your homework for that company.
@@brandyharding7692 You can also use it as a guide to sell if you think the rationale for buying not longer holds, one of which could be that the stock has run up too much and has become overvalued. In any case, the substantive point is that the formula he gave for deciding on the Buy decision is wrong - I'm sure the OP understands the math and probably just effectively made a "typo" :)
Great content! Based on this same formula, apple intrinsic value is only $142 as of 02.18.2023. Apparently the growth rate cannot catch up to the corporate bond rate and the eps stays same. Now I understand why these once hot stocks are not hot anymore during inflation. Great formula. Thanks for bringing this to me!
AT 10:55 the buy/sell recommendation logic should be if the price of the share is less than acceptable buy price.
Finally someone whos not speculating/gambling
Investing is speculating to an extent. The bet is to assume the market will realize the value.
@@jle92708 speculation Is a term used in investing to distinguish a value approach based on the analysis of a businesses financials. Speculation is reviewing the stock charge and betting that it will go
I do agree that investing requires speculation, though taking a value approach and deeply analyzing a business is using realized data to make more accurate predictions. There are no guarantees of course, but there ways to invest that isn’t just placing a bet because you feel like you can make money
@@jle92708 🤣🤣🤣🤣🤣
@@jle92708LOL
@@sheldor73
Whenever I want a good laugh I turn to the stock market community, there is always a large group of court jesters to lighten the mood :)
Great content. Acceptable buy price must be greater than Current Price for decision on "Buy", as 'Acc. (10:20) Buy price' is factored from intrinsic value itself. Need to correct this in model 1.
15:43 =IF(I30
Thank you, thought I was going mad
Very helpful, but the Buy/Sell formula should compare acceptable buy price to current price
Agree with your point
This is a great video; thank you. However, I think there's an error calculating the Acceptable Buy Price using the Margin of Safety (MoS).
If a 65% MoS for AAPL is 252.26 (388.09 x 65%), which means we want more protection; then the Acceptable Buy Price = Intrinsic Value - MoS of 65% = 135.83 (388.09 - 252.26 = 135.83).
Let's say we would accept less MoS for AAPL, which means we are more confident about the company and accepting less protection. A 35% MoS is 135.83 (388.09 x 35%). So, the Acceptable Buy Price would be 252.26 (388.09 - 135.83 = 252.26). Therefore, a 35% MoS (low MoS) would result in a low Acceptable Buy Price (252.26), and a 65% MoS (high MoS) would result in a much, much lower Acceptable Buy Price (135.83).
In contrast, the video shows that a 65% MoS has an Acceptable Buy Price of 252.26.
Absolutely agree. I think too that Buy Price = Intrinsic Value - (Margin of Safety * Intrinsic Value)
Yes, the formula is off.
You are right.
Absolutely agree, thanks for pointing out
Thank you! I was wondering if I've made a mistake because it seemed off
Hi great video, just Quick question, why the growth rate (2g) in the formula not in the percentage ( 17.93%). Thanks
It's funny that the entire valuation is based on "expected growth rate over 5 years" which is forecast by a group of investors. My concern is that there is a massive reliance on other people's idea on the shares future value.
Would have thought that this reliance defeats the entire point of the valuation.
Can anyone confirm how this 5 year growth rate is calculated by the brains trust?
This changes completely the valuation. I think it should be in %.
the growth rate express in percentage should be computed as percentage, so the intrinsic value is only around 75
Hello! if I want to calculate a stock bases in Mexico the Average yield aaa bond changes and what else? Besides the obvious. And the value should be in mexican pesos or us dollars?
Warren Buffet doesn't use this. He uses a version of this that uses free cash flow. He doesn't like to use earnings because EPS can be manipulated by management.
What is the formula or what is the name of it, pls let me know, thanks
@FakeSparrow-lu5ih unfortunately it's a well kept secret by anyone who has the formula. They're unique to the individual depending on the formula. I suggest really diving in and learning as much as you can about the topic. But on our levels, his quote "buy good companies and do nothing" works well.
@@FakeSparrow-lu5ih research "discounted free cash flow (DCF)"
@@kegomania thanks
probably worth stress testing that growth rate, tapering everything you can is worth seeing what the model implies as value
Good evening. I have a question...is the 8.5 or 4.4, and the growth rate percentages? I noticed a lot of growth rates are in percentages. For instance one growth estimate was 101.42 % So do I have to change that to 1.0142? Also, your examples, are 8.5 percentages? If they are do I need to change them to .085 or .044? i am really excited about this formula but just am confirming...especially with the growth estimate of 101.42...does that need to be changed or not. Thanks so much.
Had the same observation. Multiplier i think should be 0.1793 instead of 17.93?.
I've been searching for this spreadsheet for so long I gave up about a year ago. Somehow this came up in my feed. It's perfect! Thank you!
Awesome! I’m glad you found it!
In the IF statement, the first parameter should be (current price < acceptable buy price)
not (acceptable buy price < intrinsic value).
Thank you.
Grahams gormula is fairly accurate, it’s just that 17% growth rate is a redicilous prediction.
Are you sure at 10:50 in the video the Buy/Sell comparison is being done correctly? Should you be comparing the current price to the Acceptable Buy Price?
see pinned comment
Thank you for the video! This helps me a lot! I have a question. If I am doing the calculations with a company that has a negative EPS, and I, therefore, get a negative intrinsic value, what should I do? This seems to throw off my results
yeah in the same situation
Just my 2 cents, if growth rate is 17.93%, you have to put 0.1793 in the formula, not 17.93, in other words, if a number is expressed in percent, you have to divide percent.
No. 8.5 is % as are 4.4 and Y. So it does not matter because both numerator and denominator are inflated by a factor of 100
Question: Y value is easy to track for US Markets. How do we find Y value for non-US markets? TIA
In your formula for checking if the stock is buy or sell in 10:43, the answer will always be BUY because always will F29 be less than F23 because F29 is a product of percentage(Margin of error) to the F23. Is this formula really correct?
See the pinned comment! Thanks!
How do you factor in stock splits? Assuming there hasn’t been any stock splits, wouldn’t the results be quite different?
If the Growth Rate is a percentage, shouldnt it be listed in decimals? i.e. 0.1793?
The video is misleading, but there are some who will believe it.
That threw me too. I need to read the book I guess. Another factor in the text?
If the gwoth rate is negative. How do you calculate?
The best explanation of Intrinsic Value of a Stock!
Thank you!
Thanks for the formula it's very helpful, but how do you modify the buy sell rating to check that the acceptable buy price is above the current price?
Thank you for this. I've wanted to find a IV calculator for Graham for a while. I now officially have three different methods for calculations!🤣 1. Multiple of earnings 2. Discounted Cash Flow and now 3. Grahams. However, since I follow so much of Graham's teachings I think I'll explore this model.
I’m glad this model helps! Don’t forget about the Dividend discount model as well!
When you use these different methods of calculating IV, do they give close to the same results, or are there big differences between them? If there are big differences between them, which method do you think has turned out to be more accurate?
How do you suggest dealing with negative EPS or negative Growth? For example, currently BA and DOW.
Thanks a lot. It was very well explained.
I also find that the original formula is too agressive.
I just think you shouldn't say buy vs sell, because the goal is not being selling stock simply because the market is not there. You should keep your stock if you believe in it. You should put buy vs not buy.
To decide if you want to sell you should create a different model, where you incorporate your "pain-level".
Great thoughts. I agree!
Great Job! Simple explanations, easy to understand. Now I just have to evaluate 4000 stocks…😊
you can just automate this. as per the formula, you can acutally lookup the EPS and other numbers. Download the Script names you want to analyze, and create a dropdown of the scipts. so everytime you select the script, it will give the IV. should not take more than an hour to create this for all 4000 stocks.
@@vishwajeetpatel3872 how do i do this? is there a video explaining the proces?
I wish this video explained what these terms mean and why they're relevant.
Do you have any back testing data on these models?
The „intrinsic“ value in Graham‘s book refers to the value of the company’s assets. That is: take all the assets (not including any non-tangibles) and add them up (take depreciation into account). deduct all liabilities and divide the total of both by the shares. this gives you the value of a share should the company have to be liquidated. remember that graham lived 1929. then include a 20% safety margin and then you have the value to compare the current price to. Obviously this does not carry as much weight anymore as tech companies have little assets compared to there intellectual properties. But it is a conservative way of valuation for production companies with little intellectual properties.
Hello @Dividendology. Could you please reveiw your formula here for buy/sell versus your video posted on margin of safety buy/sell formula and clarify. You use current
See pinned comment
Thanks for the fine video. If 4.4% was used by B. Graham as the average AAA corporate bond rate, how old is that, and should it be updated and if so how? Thanks...
with the current corporate AAA BOND yeild of 4.6 does your forumula explained still work?
Thats true.. Because every stock is overvalued
Just wondering.. In the Buy/Sell recommendation...should we compare Acceptable buy price with Current price ? in the video suggested at 10:57min.. its compared Acceptable buy price with Intrinisc value..
it make sense to compare Acceptable Buy price comparison with Current price.. other wise there is no role for current price in decision making
see the description! :)
You need to apply some discipline on the units of the parameters in the model. For example, g is a %. It's better to plug in 0.1793 in Excel and format as %. A reality check - is a stock really worth $388 when it generates $5.11 per year?
Thank you for the instructional video. Very helpful. Is the growth rate coming from EPS, P/E or something else?
Academic formula for growth rate is retention ration * ROE ... Retention Ration is 1 - Dividend Yield
(2x g(17%) growth) is a percentage shouldn't it be 2x .17 instead of 2x 17? Further, stocks trade at multiples so then you would need to apply a multiple to see the actual value now at 26 times earnings?
What relation does bond yield and stock price possess ?
For some reason, my IF function is not working appropriately and I have tried several times with both of your examples. Any recommendations?
How frequently do you have to update the data this formula to determine whether it is acceptable to buy or sell? Weekly? Monthly? Daily?
Your lessons help me improve my trading strategy. Thank you for your expertise and experience!
10:46 you make the buy or sell if statement: if the acceptable buy price is less than the intrinsic value buy else sell. But you calculated the acceptable buy price by multiplying 0.65 with the intrinsic value. Shouldn't it be: If current price is equal or smaller than acceptable buy price buy else sell??? I was very confused here. The way you put the buy/sell together it will always want to buy.
Error. see the description! :)
I'm confused, in your Graham's formula you added in the P/E as a multiplier after you input the EPS, which isn't a part of the basic formula ?
You are a legend. Probably the most useful video I have seen in the last 5 years.
thank you!!
Why is P/E no growth a constant, Shouldn't it be different for different stocks?
5:40 if 2g = 2, then where is 17.93 growth rate data gonna be used in this formula?
thanks for sharing. look, what bout the growth rate? you took the 5 years as example, but there is not time function on the equation. i believe it should be relevant if you take 3 , 5 or 10 right? or im missing something.? thanks
The Yahoo data is per annum, like the bond rate. What was odd was out-of-the-blue multiplying it to get an 18x growth rate?
I think there is a mistake or im confused lol. Your acceptable buy price is .65*Intrinsic value. Which means that the buy price is always lower than intrinsic. So your last sell will always say "BUY". Shouldnt you compare to current price?
how do you find out whether a company is AAA, AA or A rated and what are the relevant numbers related to tthem ?
This is really well explained. Have you created one where you compare an individual stock intrinsic value to just buying an 8% ETF rather than bonds. They weren't around in Graham's time, otherwise I'd think he'd use this higher earning option to compare.
Video is well explained. But you could have added that Graham did actually implement two warnings in a footnote that Growth Rates are unpredictable and therefore the formula is basically not very meaningful at all.
I use 1.5 growth and have a table based on the average of the top 10 stocks in that industry divided by 2.
can you use the forward EPS instead because thats based on past quarters
So if I project yields going up on AAA bonds then I have to adjust accordingly
Very helpful thank you. Where does the revised formula come from though?
Quick question for anyone with more grey matter upstairs than myself:
------------
They Buy/Sell formula seems to only look at acceptable buy price vs. intrinsic value.
What if the current price is higher than acceptable buy price, but still lower than intrinsic value.
Is there a way to use a formula (IFS for example) to list buy if:
- Acceptable buy price is below intrinsic value AND
- current price is belowe acceptable buy price
???
Can this be used on ETFs? If so, what would be the EPS equivalent?
Listening to what you teach here is way better and more productive than sitting in a finance class for the whole year. Magnificent!
Thank you so much!!
Very good video to understand the Intrinsic value of a stock and other important points to keep in mind before buy/ sell of stocks
How often is the avg. yield AAA corporate bonds number updated? I was trying to find a current percentage and was able to find a current long term average yield of 6.51%. This is much different than the 4.4% listed in your video. What are your thoughts on this?
Feds raising rates . AAA bonds also go up to compete
For UK users, prefix the ticker with LON: and divide current price by 100 (p)
When I enter that formular for fetching the EPS, google spreedshet gives me the EPS as per the last available quarter, in my case 30 June 2023, and not the TTM. In your video, however, it seems to import the TTM EPS. What am I missing?
What if we use fcf per share instead of eps?
Do we have any hint about when this intrinsic value price would be reached ?
What happens if you took the average of both models and used those numbers?
Got a question. Does this formula apply to non-US stocks. I have tried using this on Rolls Royce Holdings (RR) and I am getting a negative number? Mathematically that checks out since the EPS is negative. I am assuming don't buy would be the recommendation.
That is correct. Accordingly to the formula if the EPS is negative, it would be a situation where the recommendation would be ‘don’t buy’.
@@Dividendology Do you know how to in google sheets to get a companies EPS that is multiple listed E.g. Rio Tinto is listed on the US and ASX.
Additionally would it be fine to make an assumption that the data would similar so just pick any?
Thanks for your video! What if the formula contains one negative number, per example the growth rate expected for the stock. In that scenario you will have a negative intrisic value, which is impossible...what should we do?
negative growth rates are not healthy for companies. I would advise you stay away.
The video is great and I thank you for your hard work. However, the formula for to Buy/Sell condition is a bit confusing; an acceptable buy price should compare with the current price column I believe. I have watched this video several times. Let me know what you think.
I think you are correct, while copying the formulas on my own spreadsheet, based on the formulas the acceptable buy price should always be less than intrinsic value, hence always a buy
What we want to know is: Is the CURRENT price an acceptable price to buy
Y si el growth rate for next 5 years es negativo, que ocurre?
Shouldn't the buy sell "if" function be based on the margin of safety rather than intrinsic value?
When the intrinsic value is less than the current stock price does the formula still work?
shouldnt the last formula to buy or sell compare the current prices to the acceptable buy price? or am i missing something?
see pinned comment
Best explanation I’ve seen on RUclips so far. I probably will have to watch this a few times but I appreciate it.
Thank you!
How would you interpret arriving at a negative "Intrinsic Value" and a negative "Acceptable Buy Price"?
Follow the model. If the market price is above the acceptable buy price (always the case if the acceptable buy price is negative) you don't buy the stock.
Hi! Just some questions out of curiosity. Why multiple average yield of bonds and divide current yield? I just want to know in what sense exactly this calculation is 'the' intrinsic value. By the way, Great lesson for beginner! Thank you! 😄
I was thinking the same thing
Thanks for the explanation so I'm guessing the second formula on the right is less aggressive and more conservative / safe entry ?
That is correct.
Is the Buy/Sell recommendation at the bottom supposed to be based on the Acceptable Buy Price and Current Price, or the Acceptable Buy Price and the Intrinsic Price? And is whether you Buy or Sell based on the Acceptable Buy Number?
The buy/sell recommendation is based on if the current price is below the acceptable buy price. The acceptable buy price is just the intrinsic value with a margin of safety.
If the current price is below or equal to the acceptable buy number, then that is an indicator that it is likely a good time to buy the stock.
@@Dividendology I might be missing something, but the formula used in the video sets the Buy/Sell decision based on if the acceptable price is less than the intrinsic value and not the current price. Is that correct?
@@jamesbuckner3769 I noticed that mistake too, but it was probably just a mistake
How and why did you pick 65% as a margin of safety?
It’s what Graham recommends!
11:33 regarding that intrinisc value, maybe one should adjust it to stock splits, as APPL was valued at 400 tbefore the last 1:4 stock split, which would mean that the stock is far ivervalued
Ofc you have to update the EPS then...
I don't see any calculation using the current price? So if the current price is higher than the intrinsic value and the acceptable price, you still should buy based on the acceptable price being lower than the intrinsic value?
Is there an app that you recommend that will perform this function?
This formula is available to literally everybody. You can be more than sure it won’t be working for retail. Not a chance.
Amazing playlist! Has exactly what I am looking for, thank you!
In your If statement I could see Acceptable value is less that intrinsic value in both the graham's case then how come the new model shows sell can you give me the formula
Am I missing something here. When I plugin the numbers for AAPL it comes out pretty low compares to what it is trading at. 6.13 × (8 + 2(.13)) × 4.4 /4.5
What if the EPS (TTM) or the Growth Rate is negative?
for the revised formula the acceptable price is still less than intrinsic value which is 141.77
great video! just the Buy/Sell part did not make sense. at 10:44, you mentioned if the acceptable price is lower than the intrinsic value (which always will be the case after applying the safety margin) then buy. Guess it should be if the acceptable price is higher than the current price then you should buy.
see pinned comment
Great video !!! Thank you so much !! Wanted to ask if the “Y” is applicable in non us markets as well (I mean if I own a non us stock do I follow the same process to find the number you showed) and if the number “4,4” is always the same. Thanks again
hey great video! Is there any websites/software you recommend out there that calculates the intrinsic value of a stock?
Yep! TickerData.com has automated sheets for this!
What do you do when a stonk has negative EPS?
Ok, how do you include the dividend of the stock
Hi, just passed by your video, this formula does not work really well for stocks that have a low EPS, do you have an explanation? as an example, NVDIA current price is 267,58$ but with this formula his intrinsic value would be 46,93$
Hello,
Thanks for the very interesting topic.
According to the ChatGPT the value should be calculated by this formula:
Intrinsic Value= SQRT ( (22.5 * EPS over last 3 to 5 years)/ 10-Year Treasury Yield)
What do you mean about it?
Regards
I THINK THERE IS ANOTHER ERROR IN THE PART OF THE FORM TO DECIDE WHETHER TO BUY OR SELL BECAUSE YOU CALCULATE IF THE ACCEPTABLE PRICE IS LOWER THAN THE INTRICATE BUY AND I THINK IT SHOULD BE IF THE CURRENT PRICE IS LOWER THAN THE ACCEPTABLE PRICE CAN YOU EXPLAIN IT?
Pls who is this coach that guides you? I’m in dire need of one
hi sir, at 10:01 minute the margin of safety 65% from where?
Watch my video on margin of safety in the description!