intrinsic value

usefulness or significance of an item derived from its physical or associational qualities, inherent in its original form and generally independent of its content, that are integral to its material nature and would be lost in reproduction See also administrative value, evidential value, fiscal value, historical value, legal value, and value.

the inherent usefulness of the material property and the structure, contents, and context of a record as either marketable property, historical artifact, social icon, or cultural relic, or all of them together. Intrinsic value depends on material integrity (q.v.); damage to or destruction of material integrity damages or destroys intrinsic value.

A company's intrinsic value, or underlying value, is used to calculate its projected worth.

You determine intrinsic value by subtracting long-term debt from anticipated future assets, including profits, the potential for increased efficiency, and the sale of new stock.

Another approach is to calculate intrinsic value by dividing the company's estimated future earnings by the number of its existing shares. This method weighs the current price of a stock against its future worth.

Critics of using intrinsic worth as a way to evaluate potential investments point out that all of the numbers except debt are hypothetical.

The term is also used in options trading to indicate the amount by which an option is in-the-money. For example, an equity call option with a strike price of 35 has an intrinsic value of $4 if the market price of the underlying stock is $39. But if the market price drops to $34, the option has no intrinsic value.