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Writer's pictureIshfaaq Peerally

How WARREN BUFFETT calculates INTRINSIC VALUE


Warren Buffett calculates the intrinsic value of any company by summing the discounted owner's earnings to infinity

Warren Buffett looks at stocks as bonds where the coupons are owner's earnings

Owner's earnings is similar to free cash flow but instead of looking at total capital expenditure, he looks at capital expenditure for maintaining the current state of the company ignoring the growth.

Next step, is to forecast the growth of that owner's earnings to infinity and use the correct discount rate

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