How to Use IRR To Value Stocks (Video with Example)

In this article:

How do you value shares or stocks using the Internal Rate of Return (IRR)?

In this video, Owen Rask explains how to use IRR to value stocks and businesses, what to look for and he uses an example for IRR on a hypothetical company.

Included:

  • What is IRR?
  • Is high or low IRR better?
  • How to calculate IRR using Excel & Google Sheets
  • The difference between NPV and IRR
  • Using IRR to value a stock/business
  • The relationship between IRR and the cost of capital

Who Cares?

IRR is a very simple and easy to understand valuation methodology. In fact, it’s probably too quick and easy!

While our video is short (20min in total), Owen provides a working template that viewers and readers can use to understand the risk-reward for almost any stock on the exchange.

IRR can be used to value:

  • Bank stocks
  • Tech stocks
  • Industrial stocks
  • Individual projects (e.g. infrastructure)
  • In corporate finance and Private Equity

This video is a bonus part of our full investment valuation series, The Value of Everything.

Download our FREE valuation spreadsheet

You can access this Google Sheet and modelling template by taking our FREE valuation course. Click here to download the materials.

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Owen Raszkiewicz

Owen Raszkiewicz

Owen is the Founder of Rask Australia, Lead Investment Analyst for Rask Invest and head educator at Rask Education. Prior to founding Rask, Owen was an investment analyst at the highly regarded managed funds research business Zenith Investment Partners and a Writer/Analyst for The Motley Fool Australia. Owen’s formal qualifications include a Master of Applied Finance and Master of Financial Planning from Kaplan Professional, Bachelor of Technology (Information Systems) from Swinburne University of Technology, Advanced Diploma of Financial Services (Financial Planning) and Diploma of Mortgage Broking Management. He's also completed level 1 of the Chartered Financial Analyst (CFA) program.

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