DCF Stock Valuation Calculator
Estimate the intrinsic value of any company using discounted cash flow analysis. Adjust growth rates, WACC, and margin of safety to find undervalued stocks.
What is DCF valuation?
Discounted Cash Flow (DCF) analysis values a company by projecting its future free cash flows and discounting them back to today's dollars. The core idea: a dollar earned in the future is worth less than a dollar today because of the time value of money. DCF is widely considered the most rigorous valuation method because it's based on the company's actual ability to generate cash, not market sentiment.
Key Concepts
Free Cash Flow (FCF): The cash a business generates after maintaining or expanding its asset base. This is the "real" profit available to shareholders. We use FCF per share to compute intrinsic value per share.
Discount Rate (WACC): The weighted average cost of capital represents the return investors require. A higher discount rate lowers the present value of future cash flows. Typical WACC ranges from 8-12% depending on the company's risk profile.
Terminal Value: Since we can't project cash flows forever, terminal value captures the company's value beyond year 10 using a perpetual growth rate. This often represents 60-80% of total value — small changes in the terminal growth rate can dramatically change the result.
Margin of Safety: A buffer between your calculated intrinsic value and the current market price. If your DCF says a stock is worth $100 and you require a 20% margin of safety, you'd only buy below $80. This protects against errors in your assumptions.
How to use: Start with a company's current FCF per share (free cash flow divided by shares outstanding) and your best estimate of future growth rates. The model assumes high growth for years 1-5, slower growth for years 6-10, and a terminal rate matching long-term GDP or inflation. If the calculated fair value is above the current price by more than your margin of safety, the stock may be undervalued.
DCF Stock Valuation Calculator — Discounted Cash Flow
Free DCF stock valuation calculator. Discount projected free cash flows, compute terminal value, and determine intrinsic value per share with margin of safety.
Year-by-Year Projection
| Year | Projected FCF | PV of FCF |
|---|---|---|
| 1 | $5.50 | $5.00 |
| 2 | $6.05 | $5.00 |
| 3 | $6.66 | $5.00 |
| 4 | $7.32 | $5.00 |
| 5 | $8.05 | $5.00 |
| 6 | $8.54 | $4.82 |
| 7 | $9.05 | $4.64 |
| 8 | $9.59 | $4.47 |
| 9 | $10.17 | $4.31 |
| 10 | $10.78 | $4.15 |
| Total PV FCF | $47.40 |