Intrinsic value described by Ben Graham in Security Analysis.

In general terms,it (intrinsic value) is understood to be that value which is justified by the facts, e.g., the assets, earnings, dividends, definite prospects, as distinct, let us say, from market quotations established by artificial manipulations or distorted by psychological excesses.

- Benjamin Graham and David Dodd


Before you risk your hard-earned money on a stock, you probably want to know the value you can expect to get in return.  The value you assign to a stock, or that stock's intrinsic value, is the maximum amount that you are willing to pay now for future benefits, which could come from dividends or the potential sale of the stock at a realistic future price.  It makes no sense to buy a stock when its intrinsic value is smaller than the current price.

Buffett cautions: "The calculation of intrinsic value, though, is not so simple ... intrinsic value is an estimate rather than a precise figure."