With any kind of financial assets, we are using our present moment cash in order to hopefully get more cash back in the future. Predict all the cash that a business can give us between now and judgement day, and.Therefore, to get to the intrinsic value of a company, we have to do two practically impossible things:

The value of a business is the present value of its cash flows from today to judgement day, discounted at a proper discount rate. The go to person when it comes to defining intrinsic value is Warren Buffett himself. Nevertheless, we can try, and use the intrinsic value we get for comparative purposes.ДЇor those that prefer the video version to the article, here it is: (article below) As the future, and especially businesses, are impossible to predict, we will never correctly assess future cash flows. After having defined intrinsic value, it would help to be all-knowing about the future, so that you can also know the exact cash flows to use when calculating intrinsic value. That is easy to say but hard to calculate as you first have to define intrinsic value. The secret of value investing is to buy a business below its intrinsic value.

By properly adjusting for reported and non-reported earnings, BRKвЂ™s forward price to earnings ratio falls from the current 20 to 11.6.

The thing that strikes me the most with BRK, is that its equity portfolio has an average PE ratio of 10.

If you are happy with a return that is two percentage points higher than the Treasury yield, BRKвЂ™s intrinsic value surpasses a trillion.

BerkshireвЂ™s intrinsic value depends on your required investment return (read вЂ“ discount rate), and the valuation you assume the company will have in the future.

Railroads, manufacturing, utilities and other from lollipops to locomotives.

Berkshire Hathaway вЂ“ Intrinsic Value Calculation

Calculating intrinsic value of stock