DCF Calculator
Calculate the intrinsic value of any stock using a professional two-stage discounted cash flow model. Includes sensitivity analysis, reverse DCF, and margin of safety. Free, no signup.
Fair Value per Share
$213.00
Current price: $100.00
Undervalued
Margin of Safety: 53.1%
Upside: +113.0%
Enterprise Value
$21.30B
PV of Growth FCF
$9.05B
PV of Terminal
$12.25B
Equity Value
$21.30B
Reverse DCF
The growth rate the current market price implies, holding all other assumptions constant.
-2.3%
implied 10-year FCF growth
The market is pricing in slower growth than your 8% assumption, leaving upside if your view is correct.
Projected Free Cash Flow
Year-by-Year Projection
| Year | Projected FCF | Discount Factor | Present Value |
|---|---|---|---|
| 1 | $1.08B | 0.9091 | $982M |
| 2 | $1.17B | 0.8264 | $964M |
| 3 | $1.26B | 0.7513 | $946M |
| 4 | $1.36B | 0.6830 | $929M |
| 5 | $1.47B | 0.6209 | $912M |
| 6 | $1.59B | 0.5645 | $896M |
| 7 | $1.71B | 0.5132 | $879M |
| 8 | $1.85B | 0.4665 | $863M |
| 9 | $2.00B | 0.4241 | $848M |
| 10 | $2.16B | 0.3855 | $832M |
| Terminal | $31.77B | 0.3855 | $12.25B |
Sensitivity Analysis
Fair value per share at different growth and discount rate combinations. Green cells indicate margin of safety above zero.
| Growth ↓ / Discount → | 8% | 9% | 10% | 11% | 12% |
|---|---|---|---|---|---|
| 4% | $222.98 | $185.28 | $158.39 | $138.24 | $122.59 |
| 6% | $261.24 | $215.91 | $183.63 | $159.49 | $140.79 |
| 8% | $306.00 | $251.64 | $213.00 | $184.17 | $161.87 |
| 10% | $358.26 | $293.27 | $247.14 | $212.79 | $186.26 |
| 12% | $419.16 | $341.68 | $286.76 | $245.92 | $214.44 |
| 15% | $529.58 | $429.23 | $358.24 | $305.57 | $265.05 |
| 20% | $777.60 | $625.22 | $517.72 | $438.17 | $377.19 |
Rows: high-growth-stage rate. Columns: discount rate. Cell values: fair value per share.
How DCF Valuation Works
A Discounted Cash Flow valuation translates a company's future cash flows into today's dollars. The logic is simple. A dollar earned ten years from now is worth less than a dollar in your hand today, because that dollar today can be invested and compound. The discount rate captures this time value of money plus the risk that the future cash flow does not arrive as projected.
The two-stage model used by this calculator separates a company's life into two phases. In the growth stage, typically 5 to 10 years, the company is expected to grow free cash flow at an above-average rate. After that, the terminal stage assumes the company grows at a sustainable rate similar to long-term GDP growth.
Fair value per share equals the sum of all discounted future cash flows, plus net cash, divided by shares outstanding. Compare this to the current market price. A wide gap in your favor is a margin of safety. Benjamin Graham, the father of value investing, recommended waiting for a margin of safety of at least 25 to 50 percent before buying.
How to Use This Calculator
- Find the company's latest free cash flow. Look at the most recent annual cash flow statement. Free cash flow equals operating cash flow minus capital expenditures.
- Set a realistic growth rate. Use the company's historical 5 or 10 year free cash flow growth, capped at what is sustainable given competition and market size.
- Choose a discount rate. 8 to 12 percent for established large-caps. Higher for riskier businesses.
- Pick a terminal growth rate. Stick to 2 to 4 percent. Above 4 percent assumes the company outgrows GDP forever, which no company does.
- Enter shares outstanding and current price. Both are easy to find on any stock quote page.
- Read the result. Compare fair value to current price. The margin of safety tells you how much room you have if your assumptions are slightly wrong.
Frequently Asked Questions
What is a DCF model?+
A Discounted Cash Flow (DCF) model estimates the intrinsic value of an investment based on its expected future cash flows, discounted back to present value using a chosen rate of return. It is the foundation of fundamental value investing and the method used by Warren Buffett, Benjamin Graham followers, and most institutional analysts.
How do you calculate DCF?+
Project the company's free cash flow for a high-growth period (typically 5 to 10 years), then assume a slower perpetual growth rate beyond that horizon. Discount each year's cash flow back to today using a required rate of return. Add a terminal value to capture all cash flows beyond the projection period. The sum is the enterprise value. Add net cash and divide by shares outstanding for fair value per share.
What is a good discount rate?+
Most analysts use 8 percent to 12 percent for established large-cap companies. A common starting point is the 10-year US Treasury yield plus a 5 to 6 percent equity risk premium. Higher-risk companies justify higher discount rates. Lower-risk, predictable businesses can use a slightly lower rate.
What is a good terminal growth rate?+
Terminal growth should not exceed long-term GDP growth, typically 2 to 4 percent. A common default is 2.5 percent to reflect long-term inflation. Using a terminal rate above 4 percent assumes the company will outgrow the entire economy forever, which is not realistic.
What is margin of safety?+
Margin of safety is the gap between fair value and current market price expressed as a percentage of fair value. A positive margin means the stock trades below its intrinsic value. Benjamin Graham recommended a minimum margin of safety of 25 to 50 percent before buying.
What is reverse DCF?+
Reverse DCF flips the question. Instead of asking what a stock is worth, it asks what growth rate the current price implies. If the market price implies 25 percent growth for 10 years, you can judge whether that is achievable. It is a powerful sanity check on bullish narratives.
Why use free cash flow instead of earnings?+
Free cash flow is harder to manipulate than reported earnings. It strips out non-cash items like depreciation and reflects actual cash a business produces after capital expenditures. Warren Buffett calls this owner earnings. Earnings can be inflated by accounting choices. Cash is cash.
When does DCF not work well?+
DCF struggles with unprofitable companies (no FCF to project), early-stage growth companies with unpredictable trajectories, financials and REITs (where standard FCF concepts do not apply), and cyclical businesses at peak or trough. For these, use P/S ratios, book value, or industry-specific models.
About WallStSmart's DCF Calculator
This calculator implements a standard two-stage discounted cash flow model used by professional analysts and institutional investors. All calculations run in your browser. No data is stored or sent to any server. For ticker-specific DCF analysis pre-populated with the latest financial data, visit any stock page on WallStSmart.