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How to estimate intrinsic value

Editor's Pick, Investing Education, Video Insights | Comments (58)

 

How to estimate intrinsic value

In this educational video Roger shares the steps for estimating intrinsic value using the formula from his book Value.able. Back in February 2011 when he applied the formula to Woolworths Roger arrived at an intrinsic value of $23.36. Today, he share with you the steps to update the estimated intrinsic value of Woolworths keeping in mind the biggest change over the last 10 years – a significant decline in interest rates.

Discover how to value the best stocks and buy them for less than they’re worth here.

The Montgomery Funds own shares in Woolworths. This article was prepared 30 April with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Woolworths you should seek financial advice.

INVEST WITH MONTGOMERY

Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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58 Comments

  1. Husain
    :

    Hi Roger,

    Could you please send me the updated tables, Tables 11.1 and 11.2?

    I read your book a few years ago and it was truly Valuable!

    Thank you,
    Husain

  4. Tom
    :

    Hi Roger,

    Really enjoyed the book and have been back to it many times. Would really appreciate getting an updated set of tables sent to my email if that were at all possible?

    Are you able to publish the formulae behind table 11.2 please?

    Thanks
    Tom

  5. Andy
    :

    Hi Roger,
    Just finished reading your book that I borrowed from a friend.
    Would it be possible to please provide a copy of the updated tables?
    Regards,
    Andy

  6. Manda
    :

    Hi Roger, could you share the latest multiplier tables with me? The ones I currently refer to are in the 2nd edition of your book.

  7. david klumpp
    :

    Thank you Roger, just got around to this video update on calculating IV and found it very informative: Thus would appreciate the latest Tables (11.1 &2) sent to my email.
    Regards David

    • david klumpp
      :

      sorry, ignore that: I see you attached these to the email I got recently. Regards
      David

  8. Matthew
    :

    Hi Roger. Thank you for your book, this was completely new insight for me. May I have the latest multiplier tables please. Ps. I have just run MFG through the formula, it looks attractive right now. Wondering if I have got that right. Thank you.

  9. Kat W
    :

    Hi Roger, I am a newbie in share investing. I have just finished reading your book and have learnt heaps. Thank you. Could you please also kindly send the updated Table 11.1 and 11.2 to me? Much appreciated.

  10. Matthew Roskvist
    :

    Hi Roger,

    A bit late to the party here as I have only just finished reading (and thoroughly enjoying) your book and are looking to apply the knowledge on top of my existing investment tools.

    Noting you have sent them to other users would it be possible to also get a copy of the updated the Income and Growth Multiplier tables?

    Thanks,
    Matt

  11. Shaun L
    :

    Hi Roger, sorry I stumbled into this artcle much later than the rest, but I was hoping if you would mind sending me the updated equity multiplier tables for lower rates of return?

    I have the second edition of Valueable and the tables on page 183-184 have much higher rates than today.

    Thanks Roger.

  12. Ben
    :

    Hi Roger,
    I purchased your book in 2010, and used it for quite a while to discover some good valued shares.
    I have only just started looking into investing recently after a long break and have discovered that the figures in the tables 11.1 and 11.2 don’t quite cover the ranges seen today.
    Are you able to please send me the updated tables?

    Thanks,
    Ben

  13. James_Miotto
    :

    Hi Roger

    I purchased the first edition a while back.

    Are you able to email me the updated tables please. thanks in advance.

  14. Wayne Terry
    :

    Fantastic!

    I applied 10% in April 2020 as I wanted to be sure I was providing a big enough buffer. Found a few gems.

    However, I too have an old version of the book so if you don’t mind sending the updated tables to me, that’d be great. I do have the process in an XL sheet but I can’t recall if I extended the formula for the multipliers out, so having these would be helpful.

    Thanks.

  15. Chris Lawson
    :

    Hello Roger, I attended your Active Investing courses at the Sydney Stock Exchange in 2002 and purchased 1st & 2nd editions of Valuable and still actively investing. Please send me the updated tables mentioned in the video.

  17. Sergey Golovin
    :

    Hi Roger,

    Thank you for the video.
    And thank you for the book that I purchased earlier.
    Could I have updated tables as well, please?

    Also, Skaffold was excellent software.
    Sad to see it is no longer working.
    Hope one day you can resurrect it.
    Not sure how you could do it, but hope it will be available for use.
    I miss that Skaffold, it was truly great software.

    Regards

  18. ken fraser
    :

    Oh Roger I just noticed that I can copy the tables from the bottom of your post so I should be ok for the copies. Thanks again, Ken.

  19. ken fraser
    :

    Hey Roger I also bought the first edition hardback copy of Value-able plus a couple of the second edition for friends. Could I have the new Tables 11.1 and 11.2 sent to me too please? Thanks a lot, Ken.

  20. val
    :

    Hi Roger
    I use a spreadsheet formulae which computes all your variables without using your book tables to formulate your intrinsic value of a company. Please ignore my previous email as it is redundant .
    I was using 7.5% return with a margin of safety of 10% ..I got some real ripper stocks …Love the book , read it on a flight to the Gold Coast 10 years ago.Thanks again

  21. Luke Fennell
    :

    At 4:16 in the video the data is from 2010? 2021 I think…. Also would love a copy of the updated tables 11.1 and 11.2 Cheers – Luke.

  22. wayne rogers
    :

    Hi Roger,

    My book is first addition also, any chance of receiving updated tables 11.1 and 11.2.

    Much appreciated

    Wayne

  23. Kerrod Thomas
    :

    Hi Roger, this is a great video and an excellent reminder as the the quality and strength of intrinsic value. At the risk of repeating the comments from others above, I also have the 2nd edition of Value.able and I’d appreciate it if you could send to me the updated tables with the lower multipliers.
    Kind regards – Kerrod.

  24. Mark
    :

    Hi Roger
    I also have the second edition of Value.able with rates of return above 8%.
    Could you please send me the tables with the lower rates of return shown in your video.
    Thanks

  25. scott
    :

    Hi Roger. I was also hoping to grab a copy of your updated tables of the required rates of return. I have both editions of your book, am an investor in the Montgomery Fund and now have a son who is eager to learn more about investing. Keep up the great work. Thanks.

  26. Paul Broadbent
    :

    Hi Roger
    I noticed in your educational video on calculating the intrinsic value that Step A – Income Multiplier and Step B – Growth Multiplier or in the Valueable Book (Tables 11.1 and 11.2) that the required return were showing columns for 5% and 4% however when I look in the book they only go down to 8%. I’ve had the book for many years now and use it for calculating intrinsic value. Is there a way to get a hold of the tables you mentioned in the video for 5% and 4% or do I need to buy an updated book?

    Kind Regards

    Paul

  27. Ricky Leong
    :

    I own a copy of value.able 2nd edition.
    How can I get updated versions of Tables 11.1 and 11.2 (Multiplier selections)?

    This edition has a minimum after tax return of 8% which is very high in the current interest rate environment.

  28. Tom R
    :

    Roger,

    For determining the required return, I use a method I think you may have mentioned in the past. I use the “risk free” rate (defined as the 10 year government bond yield, currently 1.73%) + the equity risk premium (defined as the difference between the long bond yield and the equity market total return, which is about 5% over the long term). So I am currently using 7% in my intrinsic valuation calculation.

    COVID has meant that some companies have had their earnings reduced and others have had their earnings pulled forward (eg. retailers), so the difficulty for me at the moment in calculating the intrinsic value is forecasting the future ROE of many companies.

  29. Ken Bell
    :

    I purchased the first edition of Value able many years ago when interest rates were higher. In that edition Tables 11.1 and 11.2 only have required rates of return as low as 8%. Do you now have tables with lower rates of return as in your video and if so can I please obtain a copy.
    Thank you

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