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OnlyDcf

DCF Valuation Model

Most investors chase hype. But intrinsic value—the true fair value of a business—is the only number that actually matters. This professional engine turns complex valuation math into a clear, intuitive narrative.

history Historical Financial Data

Tip: Enter components (EBIT, Tax, etc.) to calculate FCF automatically, OR enter Free Cash Flow directly if you already have the data.

Adjust Columns:
Avg Rev Growth -
Avg FCF Growth -
Avg Op Margin -
Avg Tax Rate -

tune Assumptions

Growth Period

Discount Rate

Required rate of return (WACC/Discount Rate)

Terminal Value

FCF Projection vs PV

Run calculation to see projections.

Valuation Results

Equity Bridge

PV of Future Cash
add Cash & Equiv.
remove Total Debt

⚠️ WARNING: All Equity inputs (Cash/Debt) and Shares Outstanding must be entered in matching units.

Equity Value -

Intrinsic Value

-
Fair Value Per Share
Shares Outstanding

Decision Matrix

$
%
Buy Target
-
Or lower
Verdict: Enter Data
Undervalued Fair Overvalued

grid_on Sensitivity Analysis

Intrinsic Value per Share
Run valuation to generate sensitivity matrix.
Undervalued
Overvalued
Rows: WACC | Columns: Terminal Value Input

DCF Calculator: How to Calculate Intrinsic Value

A comprehensive guide to understanding and using this valuation engine.

school What is DCF?

A Discounted Cash Flow (DCF) is a valuation methodology used to estimate a company's intrinsic value by projecting its future cash flows and discounting them back to their present value. It determines the present value of projected future cash flows by applying a discount rate that accounts for:

  • Time value of money: Inflation erodes purchasing power over time.
  • Risk: The uncertainty associated with receiving those future cash flows.
  • Cost of capital: The opportunity cost of not investing elsewhere.

The fundamental principle behind DCF is that a dollar today is worth more than a dollar in the future due to inflation, investment opportunities, and risk.

Present Value = Future Cash Flow / (1 + Discount Rate)n

Where n = number of years into the future.

Key Formulas (NOPAT Method)

1. Free Cash Flow to Firm (FCFF)

FCFF = [EBIT × (1 − Tax)] + Dep − CapEx − ΔWorkingCap
NOPAT (Net Operating Profit After Tax) calculated as EBIT × (1 − Tax Rate). This represents potential cash earnings without debt costs.
CapEx (Capital Expenditures) Funds used to acquire or upgrade physical assets. Subtracted because it's cash leaving the business.
Change in Working Capital The investment needed in short-term assets (inventory, receivables). An increase in WC ties up cash, so it is subtracted.

2. Terminal Value (The Long Term)

The model uses one of two methods to estimate value beyond the projection period:

A. Perpetual Growth (PGM)
TV = FCFLast × (1 + g) / (r - g)
Assumes the company grows at a constant rate (g) forever. Growth must be less than Discount (r).
B. Exit Multiple (EMM)
TV ≈ FCFLast × Multiple
Assumes the company is sold for a multiple of its earnings (e.g., 15x FCF), similar to comparable public companies.

Purpose of DCF Analysis

DCF analysis is the "gold standard" of valuation because it relies on the cash the business actually generates, not just accounting profits. It helps investors:

  • Determine if a stock is overvalued or undervalued relative to its cash flow potential.
  • Make informed investment decisions based on fundamentals, not hype.
  • Calculate a Fair Value purchase price (Intrinsic Value).
  • Understand key value drivers like margins, tax efficiency, and capital intensity.

calculate How to Use This Calculator

1. Historical Data Entry (Granular)

The first table requires inputs from the Income Statement & Balance Sheet. The calculator uses these to derive Free Cash Flow (FCFF):

Revenue Total sales. Used to calculate year-over-year growth trends.
EBIT (Operating Income) Earnings Before Interest and Taxes. This represents the core profitability of operations before financing costs.
Tax Rate (%) The effective tax rate paid by the company. Used to calculate NOPAT.
+ Depreciation & Amortization A non-cash expense that reduces accounting profit but not cash. We add this back to get cash flow.
- Capital Expenditures (CapEx) Cash spent on maintaining or expanding physical assets (PP&E).
- Δ Working Capital Current Assets (excl. cash) minus Current Liabilities (excl. debt). If this number grows, it consumes cash (subtracted).

2. Growth Parameters

  • Stage 1 Growth: Represents the high-growth phase (typically next 5-10 years) where the company exploits its competitive advantage.
  • Stage 2 (Fade) Growth: Represents the transition phase where growth slows down towards the mature terminal rate.

lightbulb Example Calculation

Assumption: Last Historical FCF is $1,000. Growth is 15%. Discount Rate is 10%.

Year 1 FCF: $1,000 × 1.15 = $1,150
Year 2 FCF: $1,150 × 1.15 = $1,322.50
PV (Year 1): $1,150 / (1.10)^1 = $1,045.45

Common Pitfalls to Avoid

  • warning The Exit Multiple Trap: Applying an average industry multiple (e.g. 20x) to a company that is fundamentally different (e.g. lower margins or higher debt) can drastically inflate value.
  • warning PGM Optimism: Using a Terminal Growth Rate higher than the country's long-term GDP growth (usually 2-3%) implies the company will eventually become bigger than the entire economy.
  • warning Garbage In, Garbage Out: The model is extremely sensitive to the Discount Rate and Growth Rate. Small changes in inputs lead to massive changes in output.

Frequently Asked Questions (FAQ)

Why should I use a DCF Calculator? expand_more
Price is what you pay; value is what you get. A DCF calculator helps you distinguish between the two. By focusing on cash flow rather than market sentiment, you can determine if a stock is fundamentally overvalued or undervalued, allowing for more disciplined investment decisions.
How do I enter historical data? expand_more
You don't need to calculate FCF manually. Simply enter the component data (EBIT, Tax Rate, Depreciation, etc.) into the yellow-highlighted cells. The calculator automatically computes Free Cash Flow (FCFF) using the standard formula.
Perpetual Growth vs Exit Multiple? expand_more
Perpetual Growth is ideal for mature, stable "cash cow" companies (e.g., Coca-Cola, Utilities) where long-term growth is predictable and tracks GDP.

Exit Multiple is often better for high-growth tech companies or cyclical businesses, where you assume the company will be sold or valued by the market at a certain multiple (e.g. 15x Earnings) at the end of the period.
How do I choose the Discount Rate? expand_more
The Discount Rate is typically the **Weighted Average Cost of Capital (WACC)**, representing the minimum return a company must earn on its existing asset base to satisfy its creditors and shareholders. You can input your required rate of return directly here.
What are the limitations of this model? expand_more
The DCF model relies heavily on assumptions. If your growth projections are too optimistic or your discount rate is too low, the value will be inflated. It works best for stable companies with predictable cash flows and may not be suitable for early-stage startups or highly volatile distressed assets.