Intrinsic value, also called real value, is an estimate of what an asset or company is fundamentally worth from its underlying characteristics. Comparing that estimate with the market price helps identify potential bargains or overpriced assets. section 1.3.4 section 10.2
Fundamental analysis treats financial statements as datasets: inspect income, balance sheets, and other company documents to form a value estimate. Charts provide a different lens by showing how the market’s view changes over time, helping time purchases rather than establish fundamental worth. section 1.5.1 section 10.2
Table 1.1 Comparing growth, value, and income investing
|
Attribute
|
Growth investing
|
Value investing
|
Income investing
|
|---|---|---|---|
|
Primary goal
|
Capital appreciation
|
Capital appreciation
|
Regular income
|
|
Investor focus
|
Future potential, innovation
|
Undervalued “bargains”
|
Consistent cash payouts
|
|
Typical company
|
Young, innovative, rapidly expanding
|
Mature, stable, temporarily unpopular
|
Established, predictable, high cash flow
|
|
Dividends
|
Low or none (profits are reinvested)
|
Often pays dividends
|
High and stable dividends key
|
|
Key metrics
|
High revenue growth, High P/E
|
Low P/E, Low P/B*
|
High dividend yield, stable cash flow
|
|
Risk profile
|
High
|
Low to moderate
|
Low
|
|
Time horizon
|
Long-term
|
Medium to long term
|
Any, but often for immediate needs
|
|
* P/E = price-to-earnings; P/B = price-to-booking.
|
Compare value investing with growth and income strategies by goal, metrics, risk profile, and time horizon. section 1.3.4
