If you ask three Wall Street analysts what a stock is worth, you get three numbers and three precise spreadsheets defending each one. The honest answer is that intrinsic value is a range, not a number, and any retail investor can produce a defensible range in 20 minutes using four simple methods that do not require a finance degree.
This post walks through the four. We then run all four on Microsoft (MSFT) and show how the answers triangulate.
What "intrinsic value" actually means
Buffett's definition: the discounted value of the cash that can be taken out of a business between now and judgement day. Two consequences fall out:
- Intrinsic value is forward-looking. It depends on what the business will do, not what it has done.
- Intrinsic value is a range, because the future is uncertain.
Any single-number "intrinsic value" is misleading. The right answer to "what is MSFT worth" is a range like "between 350 and 480 USD per share, depending on assumptions, with the centre of the range around 415."
Method 1: The Graham Number
The Graham number is the simplest valuation method in the value-investing canon. Benjamin Graham defined it in "The Intelligent Investor" (1949). It is a quick screen, not a precision tool, but it surprisingly often catches the right zip code.
The formula:
Graham Number = sqrt(22.5 x EPS x Book Value per Share)
The 22.5 comes from Graham's twin caps on what a defensive investor should pay: P/E at most 15, P/B at most 1.5. Multiply them: 15 x 1.5 = 22.5. The square root of (22.5 x EPS x BVPS) is the price at which you are right at the boundary of both caps.
Worked example on Microsoft (MSFT):
- MSFT EPS (TTM): roughly 12.50 USD
- MSFT book value per share: roughly 38 USD
- Graham number = sqrt(22.5 x 12.50 x 38) = sqrt(10,687) = 103.4 USD
Microsoft trades around 415 USD. The Graham number says Microsoft is roughly four times Graham's defensive-investor ceiling. That is the punchline for almost every high-quality growth compounder in 2026: by Graham's strict 1949 rules, the entire S and P 500 is wildly overvalued. The Graham number is a starting point, not a verdict. It tells you the stock is not in deep-value territory by classical metrics.
When the Graham number is useful: cyclicals at the bottom of their cycle, financials trading near book value, beaten-up industrials. When it is not useful: software, platforms, consumer brands, anything with intangibles that drive the value but do not appear on the balance sheet.
Method 2: Simplified DCF (Discounted Cash Flow)
DCF projects free cash flow forward, discounts each future year back to present at a discount rate, and sums the present values. Most retail investors think DCF requires a 200-row spreadsheet. It does not. A 3-stage simplified DCF takes 10 lines.
The formula: