Intrinsic value
Fundamental analysisThe present value of all cash a business will generate for its owners over its life.
In plain terms
What it is actually worth, as opposed to what it currently trades at.
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Glossary
Every term is defined twice: once the way a filing would put it, and once the way somebody would explain it to you across a table. The second one is usually the one that sticks.
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Fundamental analysis
Fundamental analysisEstimating the intrinsic value of a business from its financials, industry position and management.
In plain terms
Working out what a business is worth, then checking whether the market is offering it for less.
Margin of safety
Fundamental analysisThe discount between the price paid and the estimated intrinsic value.
In plain terms
Engineering tolerance for money. It exists because your estimate has error bars.