How is intrinsic value defined?

Intrinsic value refers to the actual worth of an asset based on fundamental analysis, without regard to its market price or fluctuations influenced by supply and demand. This value is derived from aspects like cash flow, dividends, and overall financial health, making it a critical concept in investment analysis.

When determining the intrinsic value, investors consider the underlying factors that contribute to the asset's potential to generate income or appreciate over time. Unlike market price, which can be affected by market sentiment or temporary factors, intrinsic value is focused on the essential characteristics and performance metrics of the asset itself.

In this context, the other definitions do not encapsulate the essence of intrinsic value. The market price reflects what buyers are willing to pay in the current market, while book value typically represents accounting figures on a balance sheet that may not accurately depict true asset worth. Lastly, future projected value considers expectations of growth or returns based on forecasts, rather than the assessment based on current fundamental characteristics. Thus, intrinsic value is fundamentally about the inherent attributes and financial viability of the asset, independent of external market conditions.