From 'Security Analysis', 1940 Edition, by Benjamin Graham and David Dodd:

We must recognize, however, that intrinsic value is an elusive concept. In general terms it is understood to be that value which is justified by the facts, e.g., the assets, earnings, dividends, definite prospects, as distinct, let us say, from market quotations established by artificial manipulation or distorted by psychological excesses.

It is not sufficient to know what the past earnings have averaged...

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From 'Valuation, Measuring and Managing the Value of Companies', by T. Copeland, T. Koller & J. Murrin:

The value of operations equals the discounted value of expected future free cash flow. Free cash flow is equal to the after-tax operating earnings of the company, plus non-cash charges, less investments in operating working capital, property, plant and equipment, and other assets.

This is the discounted cash flow model, where factors of inherent stability allow one to use past and current data as a guide to future business prospects.
The major problem occurs...

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