What is the intrinsic value of a stock?
Intrinsic value is an estimate of a company's true economic worth, calculated from its fundamentals: its earnings, its cash flows, its assets. It contrasts with the share price, which reflects what the market is willing to pay at a given moment - and which can drift away from it considerably, in either direction.
It was Benjamin Graham, the father of value investing, who formalised this concept in Security Analysis (1934) and The Intelligent Investor (1949). His conclusion: the share price oscillates around intrinsic value over the long run, but can drift away from it for months or years because of market psychology.
Intrinsic value > Share price → Undervalued stock → Buying opportunity
Intrinsic value < Share price → Overvalued stock → Avoid or sell
The gap between the two is called the margin of safety. Graham recommended buying only if this gap exceeds 30%.
The 3 methods for calculating intrinsic value
There is no single "correct" method - each approach has its strengths and blind spots. On Euronext Growth small caps, combining two methods gives a more robust valuation range than any single estimate.
Intrinsic value calculator
Enter the figures for the company you are analysing to get an estimate of its intrinsic value per share:
⚠️ The Graham formula was calibrated for the 1970s US market. On Euronext Growth it serves as a quick benchmark, not a reference valuation. Use the multiples method for a more precise estimate.
The margin of safety: buying at a discount
The margin of safety is the percentage gap between the estimated intrinsic value and the share price. It is the protective cushion against estimation errors.
If you estimate a stock's intrinsic value at €10 and it trades at €7, the margin of safety is 30%. Graham recommended this minimum 30% discount as a general rule. For Euronext Growth small caps, which are less liquid and less covered, a 40% margin is more prudent.
You sometimes get your estimates wrong. Future revenue is uncertain. Management can surprise on the downside. The margin of safety is not a guarantee against loss - it is a reduction in the probability of a permanent loss of capital.
A worked example: valuing a Euronext Growth small cap
Take a fictional industrial small cap, Technilog SA, trading at €4.80 on Euronext Growth. Here is how to calculate its intrinsic value using the multiples method:
By varying the EV/EBITDA multiple from 6.5× to 9× (a reasonable range for this sector), you get an intrinsic value between €2.90 and €4.40. The decision to invest is taken on the low end of the range - not on the central value.
Intrinsic value and the ML screener
Calculating the intrinsic value of 4,120 small caps across Europe, the UK and the US by hand is impossible. This is where a screener with an ML model becomes useful:
- The composite score's Valuation pillar incorporates EV/EBITDA, normalised P/E, and discount to book value - three proxies for relative intrinsic value
- The overall 0-100 score combines valuation, growth, quality and momentum: a high score means the stock is attractive across several dimensions at once
- The XGBoost model predicts the probability of outperforming the European small-cap index over 12 months - a signal that complements absolute valuation
The screener does not replace the intrinsic-value calculation - it complements it by shortlisting the 20 to 30 cases that deserve a deeper analysis.
The screener's Valuation score incorporates EV/EBITDA, P/E and discount to book value across 4,120 small caps across Europe, the UK and the US.
New to screening European small caps? See the European small-cap stock screener guide and the glossary. Once you've estimated a value, browse the currently undervalued European stocks or read how to value a stock.