Professional intrinsic value · Intrinsic value
Residual income model
Starts with current book equity and treats only earnings above the required return as added value; especially useful for banks, insurers and brokers.
- Guide level
- Practical
- Output
- Intrinsic value
Core formula
Equity value = current book value + Σ residual incomeₜ / (1 + cost of equity)ᵗHow to interpret it
Starts with current book equity and treats only earnings above the required return as added value; especially useful for banks, insurers and brokers.
The output should be read as a scenario or decision aid, not as a guaranteed price target. Compare it with at least one method based on different economic assumptions.
Practical workflow
- Normalize the latest public financial and operating data.
- Choose assumptions that match the company's economics and accounting structure.
- Calculate conservative, base and optimistic cases where the method permits.
- Compare the result with market pricing and an independent valuation method.
- Document the assumptions that drive the largest changes in value.
Key limitation
Book-value quality, loss provisions and normalized long-run ROE require careful judgment.
How Stockinsky uses it
Stockinsky uses this framework only when the company type and available data support it. Professional valuations expose assumptions, sources and warnings instead of presenting false precision.