Intrinsic value is an estimate of what a stock is actually worth, based on the underlying business — not what the market is currently willing to pay for it. The market price fluctuates daily based on sentiment, fear, and greed. Intrinsic value is calculated from fundamentals: how fast the company grows its book value, and how much cash it returns to shareholders as dividends.

This analysis uses the CTA Research DCF method, which asks a simple question: If I own this business for 10 years, project how much it will be worth at the end, add up the dividends I collect along the way, then discount everything back to today's money — what should I pay right now?

Book Value Per Share (BVPS) is the net asset value of the company divided by shares outstanding — it represents what shareholders would theoretically receive per share if the company wound down and paid out all assets after settling all debts. It is found on the Balance Sheet.

A higher CAGR generally reflects a more profitable, capital-efficient business. However, stability matters as much as magnitude — a company that grew at 15% for 10 consecutive years is far safer to model than one that averaged 15% but swung wildly between +40% and −10% in different years.

How the formula works, step by step:

1. Project Future Book Value: Starting from today's BVPS, we compound it forward at the historical growth rate for 10 years. This gives us an estimate of what the company's net asset value per share will be in 10 years.

2. Add Total Dividends: We assume the annual dividend stays constant (a conservative assumption) and add 10 years of dividend income to the projected book value. This represents all the cash the business returns to shareholders over the holding period.

3. Discount Back to Today: Future money is worth less than present money. We use the risk-free rate (the 10-year government bond yield) as the discount rate, because that's the return you could earn with zero risk. Dividing by (1 + r)^10 translates the future value into today's purchasing power.

The result — Intrinsic Value — is what you should be willing to pay today to earn exactly the risk-free rate over 10 years. Paying less than this means you earn more than the risk-free rate. That excess return is your reward for taking equity risk.

The Margin of Safety (MOS) is the percentage gap between intrinsic value and the current market price. A positive MOS means the stock is trading below your estimate of intrinsic value — the larger the gap, the greater the protection against being wrong in your assumptions. Benjamin Graham and Warren Buffett both insist on a minimum 25% margin of safety before committing capital. This buffer absorbs errors in your growth rate estimate and unforeseen business deterioration.

Important limitation: This model assumes a constant growth rate and constant dividend. Real companies are messier — growth accelerates or decelerates, dividends are cut or raised, and book value can be distorted by share buybacks or write-downs. The Sensitivity Table (in the calculator) shows how your intrinsic value changes across different growth and discount assumptions — always consult that range, not just this single number.

The table below shows every year of the projection explicitly. Each row represents one year of ownership: the book value grows at your assumed rate, and you receive the annual dividend. The final PV of Cash column discounts each year's dividend back to today's value — this is what each year of income is actually worth to you right now. The final row sums everything up to arrive at the intrinsic value.

Book Value Per Share (BVPS): Net assets of the company divided by shares outstanding. Found on the Balance Sheet. Think of it as the "liquidation value" per share — what each shareholder would theoretically receive if the company sold everything and paid all debts.

CAGR (Compound Annual Growth Rate): The steady annual rate that would produce the same total growth as the actual year-by-year results. It smooths out individual years and gives you one representative growth figure to model forward.

Discount Rate: The rate used to convert future money into today's value. We use the risk-free rate (government bond yield) because that's your benchmark — any equity investment should beat this, otherwise you're taking risk for no extra reward.

Present Value (PV): What a future sum of money is worth in today's terms. R1,000 in 10 years is worth less than R1,000 today because of the time value of money — you could have invested today's money and earned a return over those 10 years.

Margin of Safety: The percentage by which the market price is below your intrinsic value estimate. It is your buffer against being wrong. The wider the margin, the safer the investment.

Intrinsic Value: Your estimate of what the business is actually worth, independent of market sentiment. When the market price falls well below intrinsic value, a buying opportunity exists. When it trades above, you are being asked to overpay.