Intrinsic Value

The calculated "true" worth of a security based on fundamental analysis, independent of its current market price. For stocks, intrinsic value is typically estimated through discounted cash flow models, earnings multiples, or asset-based approaches. In options, intrinsic value is simply the difference between the underlying's price and the strike price (if favorable). Warren Buffett has built his entire investment philosophy around buying securities trading below their intrinsic value and waiting for the market to recognize the gap.