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According to value investing, the general way to find the instrinsic value of a company, and therefore its stock, is to estimate its future cash earnings in perpetuity.

However, this doesn't take into account the company's book value, the net value of its assets minus its liabilities, namely debt. Warren Buffett, the world's most famous value investor, recently divested Berkshire Hathaway's shares of 4 major airlines, citing that they had taken on too much debt, selling them at a loss, since those airlines' stocks are selling at historic lows. This seems to indicate valuing future cash earnings for some time period, and then estimating proceeds from its liquidation (again, all discounted to the present).

What are some principles or rules of thumb related to this that other value investors use in valuation?

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The intrinsic value takes into account revenue-generating book value

Consider an airliner. It has multiple airplanes. If those are generating revenue (and hopefully profit), when discounting the future cash earnings to today's value, you are already taking into account the value of the airplanes. If you were to take the value into account again, you would be doubly counting the airplanes.

The only case when book value would not be included in the intrinsic value would be when the book value is not generating revenue. For example, in today's situation perhaps 20% of airplanes are creating revenue and 80% are not. If you assume today's situation will remain to be the case forever, then airlines have significant book value not included in their intrinsic value. However, most investors will probably assume a return back to normal occurs someday in the future.

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