What it is
If you owned this business outright, took out every dollar of distributable cash, and kept doing that for the rest of the company's life, what would the discounted total be worth today?That number is intrinsic value. It's a calculation, not a quote. The stock price is what other people are willing to pay. Intrinsic value is what the business is actually worth as a cash machine.
How Buffett estimates it
Buffett: "Intrinsic value is an all-important concept that offers the only logical approach to evaluating the relative attractiveness of investments and businesses. Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life."In practice, he uses owner earnings × growth × discount rate. The discount rate is typically the long-term Treasury yield (he doesn't add an "equity risk premium" for businesses he understands).
Why two analysts get different numbers
Intrinsic value isn't a fact — it's an estimate based on assumptions. The most sensitive inputs: 1. Growth rate for the next 10–20 years 2. Terminal multiple (what someone will pay in year 20) 3. Discount rate (the required rate of return)A 1% change in any of those moves the answer materially. That's why margin of safety matters: even your own best estimate is wrong, and you need protection against the error.