Warren Buffett Fair Value Calculator
Buffett's approach: discount 10 years of owner earnings — what an owner could truly take out.
Also available in German: Warren-Buffett Fair-Value Rechner (Owner Earnings) →
Inputs
Owner earnings
Also called: Buffett owner earnings
Where to find it: Derive from the cash-flow statement.
How to derive: Net income + D&A − maintenance capex (± working capital).
Growth rate
Also called: Growth per year
Where to find it: Analyst estimates or the company’s historical earnings/revenue growth.
How to derive: (value now ÷ value n years ago)^(1/n) − 1. Estimate conservatively!
Discount / required rate
Also called: Required return, hurdle rate
Where to find it: Your own required return — or via CAPM (discount-rate calculator).
How to derive: Risk-free rate + beta × market premium. Equities typically 7–10%.
Terminal growth
Also called: Perpetual growth rate
Where to find it: An assumption — not in the filings.
How to derive: Long-run growth after the forecast phase. Cap near GDP growth (2–3%).
Margin of safety
Also called: Safety buffer
Where to find it: A buffer you choose — not a balance-sheet figure.
How to derive: Discount on fair value (e.g. 25%) to absorb errors. Graham/Buffett principle.
Share price
Also called: Stock price, market price
Where to find it: Any finance site (Google/Yahoo Finance) — the current trading price per share.
How to derive: Set by the market; just enter the current price per share.
Result — live
Owner earnings ≈ net income + D&A − maintenance capex (± working capital). "Better roughly right than precisely wrong."
This calculator estimates intrinsic value the way Warren Buffett frames it: it discounts ten years of owner earnings — the cash an owner could truly take out — and applies a margin of safety. Meant for stable, understandable businesses.
How the formula works
Owner earnings ≈ net income + depreciation − maintenance capex. The calculator projects them for ten years, discounts them, adds a terminal value, and cuts the result by your margin of safety to a buy price.
Buy price = intrinsic value × (1 − margin of safety)
Example: $6 owner earnings, 6% growth, 9% discount rate: ten years ≈ $52, terminal value ≈ $66 → intrinsic value ≈ $118. A 25% margin sets a buy price of $88.
How to read the result
- Price below the buy price: margin of safety met — Buffett's sweet spot.
- Between buy price and intrinsic value: fair, but without a cushion.
- Price above intrinsic value: too expensive, no margin.
What to watch out for
- Owner earnings are an estimate: maintenance capex especially is a judgment call — lean cautious.
- Discount rate and terminal growth leverage: small changes shift the value a lot; run several scenarios.
- Stable models only: cyclical or unpredictable firms can hardly be projected ten years out.
Frequently asked questions
What exactly are owner earnings?
Buffett's measure of true cash return: net income plus depreciation minus the capex needed to hold the competitive position (± working capital).
How large should the margin of safety be?
Typically 20–50%. The less certain your estimates, the bigger the margin. It is your cushion against error, not a promise of profit.
Where do I get owner earnings?
From the cash flow statement and fixed assets in the annual report. In our Fair Value Calculator the figures are already on file for 12,000+ stocks — no typing required.
Not financial advice · No buy/sell recommendations · Past performance is not a guarantee of future results.