Warren Buffett Intrinsic Value Calculator
Calculate intrinsic value the Buffett way: discount ten years of owner earnings plus a terminal value to today, with formula, example and margin of safety. Free.
Today’s focus
Airbnb+19%Details →Price $150Fair value $178Details → Also available in German: Innerer Wert nach Buffett: Rechner mit Owner Earnings →
Owner earnings in year t = OE × (1 + g)ᵗ, discounted by (1 + r)ᵗ; terminal value = year-10 OE × (1 + terminal growth) ÷ (r − terminal growth)
Buy price = intrinsic value × (1 − margin of safety); owner earnings = net income + depreciation − maintenance capex
Example: owner earnings of $6 per share, 6 % growth, 9 % discount rate, 2 % terminal growth: the ten years are worth $51.63 today, the terminal value $66.14, so intrinsic value is $117.77. With a 25 % margin of safety the buy price is $88.32. At a price of $100 the stock trades 17.8 % below intrinsic value, but above the buy price.
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 is Warren Buffett's intrinsic value formula?
Buffett values a business by the cash it will hand its owners in the future, discounted to today. He described these owner earnings in his 1986 shareholder letter: net income plus depreciation minus the capital spending needed to keep the business as it is. The calculator discounts ten years of them, adds a terminal value and subtracts a margin of safety. With $6 of owner earnings, 6 % growth and a 9 % discount rate the result is $117.77.
How does Warren Buffett calculate intrinsic value?
In three steps: first estimate owner earnings per share, second project them ten years with a cautious growth rate and discount each year back to today, third add a terminal value for the years after that. Buffett himself stresses that the result is a range, not a precise number, which is why he only buys well below intrinsic value.
What discount rate does Buffett use?
Buffett has said he uses the long-term US Treasury rate as a starting point and makes up for it by demanding great certainty about the business itself. Without that certainty, 8 to 10 % is the safer choice. The calculator starts at 9 %: one point more lowers the value in the example from $117.77 to $102.04.
Is intrinsic value the same as fair value?
Nearly. Both mean what a stock is worth on its own numbers, independent of the market price. Intrinsic value is Buffett's term for one method (discounted owner earnings). Our fair value for every stock combines 26 models, this one included.
Which growth rate should I enter?
Rather too low than too high. A good anchor is earnings growth over the past five to ten years, capped at around 10 to 12 %. Terminal growth should not exceed long-run economic growth, so 2 to 3 %.
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 to 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 35,000+ stocks, no typing required.