Intrinsic Value Is a Range, Not a Number

The best investors don’t calculate a value. They define a bandwidth of conviction.

“Valuation is not a science of precision. It is a discipline of judgment.” — Howard Marks

In investing, there’s a subtle but crucial mental shift that separates institutional-caliber decision-making from spreadsheet wizardry: realizing that intrinsic value is never a precise number. It is always a range.

Many investors — especially those trained in financial modeling — obsess over discounted cash flows, terminal values, and precise IRR targets. But markets are messy, businesses are dynamic, and assumptions rarely behave.

That’s why some of the most successful long-term investors — from Capital Group and Fidelity to Wellington and Baillie Gifford — think in value bands, not point estimates. And doing so fundamentally changes how you invest.

Why Precision Is the Enemy of Good Valuation

On paper, you can build a DCF model that gives you a target price of $94.37. In practice, that number is only as good as your:

• Revenue growth assumptions
• Margin trajectory
• Capital intensity
• Terminal value assumptions
• Discount rate/WACC

Each of these inputs has a reasonable range — not a single truth. That uncertainty compounds.

A 1% change in WACC or terminal margin can swing your valuation by 30–50%. Yet we anchor on “target prices” as if they’re GPS coordinates.

What the Pros Do Differently: They Embrace Ranges

Capital Group

Rather than issuing a single target price, they frame valuation as a conviction zone:

“We underwrite a base case, a bull case, and a bear case — then weigh them probabilistically. Our goal is not precision. It’s asymmetry.”

Their analysts present a value range — often 20–40% wide — and focus on where the stock is trading relative to that zone.

Baillie Gifford

As long-duration growth investors, Baillie Gifford intentionally avoid DCF precision:

“We model future potential in scenarios — not spreadsheets.” “What matters more than exact value is the scale of opportunity and the shape of downside.”

Their framework looks for unbounded upside and bounded risk, not mechanical price targets.

Fidelity (Contrafund)

Fidelity’s team often builds valuation corridors, incorporating relative and absolute frameworks.

They use this range to size positions dynamically:

• Undervalued vs. range = add
• Fairly valued = hold
• Exceeds upper bound = trim

It’s a flexible tool, not a rigid trigger.

What You Gain by Thinking in Ranges

1. Better Decision-Making Under Uncertainty

When you anchor to a number, every small change feels like a threat. When you embrace a range, you create room for judgment, scenario planning, and edge.

Intrinsic value is a moving target. A range lets you adjust while staying grounded.

2. More Rational Position Sizing

Thinking in value bands lets you size based on margin of safety and expected skew:

• Near the lower end of your range? Size up.
• In the middle? Stay put.
• Near or above the upper bound? Reduce or exit.

3. Clearer Separation Between Price and Value

A range provides context. If a stock falls 20%, is it:

• Still within your range?
• Now below your base case?
• Or reflecting new information that shrinks the range?

This helps prevent emotional decisions during volatility.

4. Mental Flexibility Without Losing Rigor

You still model deeply. You still challenge assumptions. But you don’t pretend to be precise about something inherently uncertain.

A Practical Framework: The 3-Layer Valuation Range

For most businesses, sophisticated investors construct a value band using these components:

You then ask:

• Where is the stock trading relative to this range?
• What is the probability-weighted IRR?
• How does that compare to other opportunities available in the market?

This approach is standard at large institutional shops — and it removes the illusion of control that precision models often create.

Final Thought: Stop Chasing Precision. Start Building Conviction.

Most valuation errors don’t come from bad math. They come from overconfidence in a single scenario.

“A good investor is not someone who knows the future. It’s someone who can navigate a wide range of outcomes without blowing up.” — Wellington Management

The best investors don’t just build models. They build conviction corridors — flexible frameworks to make decisions when the world refuses to follow the script.

Intrinsic value is a range. Treat it that way, and you’ll make fewer mistakes, size smarter, and hold through volatility with far more confidence.