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Intrinsic Value vs. Price: Measuring Real Investment Progress

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  Published in Stocks and Investing on Monday, December 8th 2025 at 11:13 GMT by Forbes

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How to Measure True Investment Progress: Intrinsic Value vs. Price
An In‑Depth Summary of Jon Markman’s 2025 Forbes Feature

In an era where market sentiment can swing wildly and short‑term price movements dominate headlines, Jon Markman’s Forbes article “How to Measure True Investment Progress: Intrinsic Value vs. Price” offers a refreshing reminder that the ultimate yardstick for a successful investment is the intrinsic worth of the asset, not the noise of the trading floor. The piece, published on December 8, 2025, guides readers through the practical steps of calculating intrinsic value, tracking it against market price, and interpreting the resulting gap—or “value differential”—as a measure of long‑term progress.

1. The Core Argument: Why Intrinsic Value Matters

Markman opens by stressing that the price of a security is a price: it is a consensus estimate of future earnings, risk, and liquidity at a single point in time. It is highly sensitive to market sentiment, macro‑economic headlines, and even algorithmic trading spikes. In contrast, intrinsic value is a fundamental estimate—a model‑derived figure that attempts to capture the true economic worth of an investment based on its cash‑flow potential, growth prospects, and risk profile.

The article argues that tracking the distance between these two figures over time offers investors a quantifiable measure of progress. If a company’s price consistently tracks its intrinsic value, the market is deemed efficient for that asset. However, if a persistent price‑to‑intrinsic‑value divergence appears, investors can exploit this mispricing—buying when the price falls below intrinsic value and selling when it climbs above.

2. The Three Pillars of Intrinsic Value Estimation

Markman breaks the valuation process into three logical, interchangeable components that can be blended depending on the investor’s data, skills, and risk appetite:

Markman points out that the DCF method is the most “intrinsic” in the sense that it doesn’t rely on the current market’s perception of the firm; it uses the firm’s own fundamentals. However, it is also the most data‑hungry and sensitive to assumptions. Comparable analysis offers a quick sanity check and can help adjust DCF assumptions, while the DDM is often the simplest approach for mature companies.

The article includes a side note referencing a Forbes companion piece, “The DCF Method Demystified”, which walks through an example of valuing a technology start‑up with a high growth trajectory. This link is valuable for investors who want to drill down into each valuation technique before applying it.

3. Measuring the Gap: Price vs. Intrinsic Value

Once the intrinsic value estimate is produced, Markman recommends calculating the price‑to‑intrinsic‑value ratio (P/IV):

[ \text{P/IV} = \frac{\text{Market Price}}{\text{Intrinsic Value}} ]

If the ratio is < 1, the security is undervalued. If it is > 1, it is overvalued. For long‑term investors, the article suggests focusing on the cumulative P/IV over time, rather than a single snapshot. A moving average of the ratio helps smooth out short‑term volatility.

Markman illustrates this with a real‑world example: a mid‑cap consumer‑goods firm that had a P/IV of 0.70 in 2023 but, after an earnings beat and strong free‑cash‑flow growth, reached 0.85 by the end of 2025. The article then highlights that the price has risen by 20%, yet the intrinsic value has grown by 30%, indicating that the investment’s true value has improved even though the price lagged slightly.

4. Interpreting the Value Differential

The article offers a set of interpretive guidelines:

1. Stability Across Sectors – Intrinsic value tends to be more stable in regulated industries (utilities, healthcare) than in speculative ones (cryptocurrencies, biotech).
2. Time Horizon – A persistent undervaluation (P/IV < 0.9 for 12+ months) can signal a buying opportunity, but investors must assess whether the underlying catalysts are realistic.
3. Macroeconomic Sensitivity – In high‑inflation periods, discount rates need upward adjustment; failing to do so inflates intrinsic value estimates and can produce misleading overvaluation signals.
4. Quality of Data – A poorly documented DCF—especially one that underestimates future cash‑flow volatility—can produce an inflated intrinsic value. Markman stresses the need for a robust sensitivity analysis across discount rates, growth rates, and terminal values.

Markman also points to a Forbes article, “Revising Discount Rates in an Inflationary World,” which provides a framework for adjusting discount rates and offers a ready‑made spreadsheet template. The template is particularly useful for investors who want to test different scenarios quickly.

5. Practical Tools and Resources

The article lists several free and paid tools that can help investors automate the P/IV calculation:

• Yahoo Finance / Google Finance – For real‑time price and basic financials.
• Macrotrends – Offers long‑term historical data on dividend yields and growth.
• Simply Wall St – Provides an easy‑to‑read DCF output, though it is subscription‑based.
• Excel or Google Sheets – With pre‑built valuation templates that allow dynamic input of growth assumptions and discount rates.
• Python libraries (pandas, yfinance, scikit‑learn) – For more advanced, batch‑processing of multiple stocks.

Markman stresses the importance of verification. A single data source can be wrong; cross‑checking fundamentals from two or more databases reduces the risk of erroneous intrinsic value estimates.

6. Case Studies: From Theory to Practice

Markman finishes the article with two contrasting case studies, illustrating how the P/IV methodology can drive investment decisions.

1. The Undervalued Growth Stock
   - Company: “TechNova” (a fictional high‑growth semiconductor firm).
   - DCF Intrinsic Value: $120 per share.
   - Market Price: $85 (P/IV = 0.71).
   - Action: Buy.
   - Outcome: Over the next 18 months, the stock rose to $145, while intrinsic value grew to $150. The P/IV moved from 0.71 to 1.04, reflecting both the price appreciation and the real growth in intrinsic value.

2. The Overvalued Defensive Stock
   - Company: “SafeWater Inc.” (a municipal water supplier).
   - DCF Intrinsic Value: $30 per share.
   - Market Price: $45 (P/IV = 1.50).
   - Action: Sell or avoid.
   - Outcome: The market price dipped to $35 after a regulatory change, while intrinsic value remained near $32, pulling the P/IV to 1.09—an improvement but still overvalued.

These examples emphasize the importance of continuous monitoring and adjusting for new information, which can shift the intrinsic value estimate and thereby alter the investment thesis.

7. The Takeaway

Markman’s article ultimately champions value investing as a disciplined, data‑driven discipline. By rigorously estimating intrinsic value and tracking the price‑to‑intrinsic‑value ratio over time, investors can:

• Quantify how close the market is to recognizing a company’s true worth.
• Detect mispricing opportunities that are not apparent from price alone.
• Avoid being swept up in speculative price moves that do not reflect underlying fundamentals.

The article is an excellent primer for anyone looking to add a systematic approach to portfolio management. It also serves as a practical checklist: “Have you updated your intrinsic value estimate in the last quarter? What is the current P/IV? Is the deviation within a tolerable range, or does it present a clear trade?”

8. Final Thoughts

If you are ready to transform how you evaluate your portfolio, start by building a simple spreadsheet that calculates DCF, comparables, and dividend discount values for your holdings. Then compute the P/IV for each and watch the trend. A consistently improving P/IV indicates that you’re either holding a true value stock or that the market is catching up to its intrinsic worth. On the contrary, a persistently high P/IV should prompt a deeper look into whether the overvaluation is justified by new growth catalysts or merely a bubble waiting to burst.

Markman’s article not only lays out the theory but also equips you with the tools and references to implement it. The links to companion Forbes pieces—such as “The DCF Method Demystified” and “Revising Discount Rates in an Inflationary World”—provide further depth for those eager to refine their valuation craft. In an era of data overload and rapid market shifts, grounding your decisions in intrinsic value remains the most reliable compass for true investment progress.