Intrinsic Value Calculator (DCF Model) — Stock Valuation Tool
🧩 Understanding Key Terms in the DCF Calculator
1. What is Intrinsic Value?
Intrinsic value means the true worth of a stock — what the company is actually worth based on its future ability to make money, not just what the market says today.
Think of it like this:
If a company were a machine that prints money (cash flows), intrinsic value tells you what that machine is worth today.
So, if the intrinsic value is higher than the current stock price, it may be undervalued (a good buy).
If it’s lower, it may be overvalued (better to avoid or sell).
2. What is DCF (Discounted Cash Flow)?
Discounted Cash Flow (DCF) is a valuation method that estimates how much a company is worth today based on the money it will likely make in the future.
You project the company’s future free cash flows (FCF) for a few years, then “discount” them back to today’s value using a rate (the discount rate).
In simpler words:
Future money is worth less than money today.
DCF adjusts future earnings to today’s value — just like figuring out what $1,000 received 5 years later is worth right now.
3. What is FCF (Free Cash Flow)?
Free Cash Flow (FCF) is the real cash a company earns after paying for all its business expenses and investments.
It’s what’s left that can be used to:
-
Pay dividends 💰
-
Buy back shares 📈
-
Reduce debt 💳
-
Reinvest in growth 🚀
Example:
If Apple earns $100 billion but spends $80 billion on running costs and new stores, its FCF is $20 billion — the “free” money that truly matters to investors.
4. What is the Discount Rate (Required Return)?
The discount rate reflects the return you expect for taking risk by investing in the company.
It’s usually based on:
-
WACC (Weighted Average Cost of Capital), or
-
The return you could earn elsewhere (opportunity cost).
Higher discount rate → lower valuation (you’re demanding more return).
Lower discount rate → higher valuation.
5. What is Terminal Growth Rate?
After 5–10 years of projections, the terminal growth rate assumes how much the company will grow forever after that period. It’s typically between 2%–4%, similar to long-term GDP growth.
6. What is Shares Outstanding?
This is the total number of company shares currently available in the market.
It’s used to calculate the per-share intrinsic value:
Total Intrinsic Value ÷ Shares Outstanding = Value per Share
7. What Does Sensitivity (±2%) Mean?
Since predictions are never perfect, the tool shows how the value changes if the growth rate is slightly higher or lower (by ±2%). This helps investors see the range of possible values — making decisions more informed.
How to use this tool — Inputs & Outputs (At a glance)
This table describes exactly the fields used by the calculator. Read this before you enter values.
Field |
Type |
Meaning |
Example |
|---|---|---|---|
Latest Free Cash Flow (FCF) |
Input |
Most recent annual free cash flow (operating cash flow − capex). Choose units (₹ / Lakh / Crore or USD). |
USD 10,000,000 (Apple) or ₹5,000 Lakh (Indian example) |
FCF Unit |
Input |
Select the unit so the calculator scales numbers (Rupees / Lakh / Crore / USD). |
₹ Lakh, ₹ Crore, USD |
Shares Outstanding |
Input |
Total diluted shares outstanding used to compute per-share value. |
Apple: 16,000,000,000 | Infosys: 3,500,000,000 |
Projection Years |
Input |
Years to forecast FCF before calculating terminal value. Typically 5–10 years. |
10 |
Average Annual FCF Growth (%) |
Input |
Expected compound annual growth in FCF for the projection period. |
8% (mature firm) / 20% (high growth) |
Discount Rate (%) |
Input |
Investor’s required return or WACC; used to discount future cash flows. |
10–14% (common) |
Terminal Growth Rate (%) |
Input |
Long-term growth rate after projection period (Gordon Growth). Keep conservative (2–4%). |
3% |
Current Market Price (CMP) |
Input (optional) |
Used to compare intrinsic value per share with market price to generate a Buy/Hold/Sell signal. |
USD 150 / ₹1,300 |
Present Value of projected FCFs |
Output |
Sum of discounted FCFs for projection years. |
USD 40,000,000 |
Present Value of Terminal Value |
Output |
Discounted terminal (perpetuity) value representing cash flows after projection. |
USD 90,000,000 |
Total Enterprise Value (PV) |
Output |
PV(projected FCFs) + PV(terminal). |
USD 130,000,000 |
Intrinsic Value per Share |
Output |
Total enterprise value divided by shares outstanding. |
USD 13.00 / ₹130.00 |
Where to Find Inputs (Quick Sources)
- Free Cash Flow (FCF): Company cash flow statement (annual report) or financial sites like Screener.in, Moneycontrol, Yahoo Finance.
- Shares Outstanding & CMP: Stock exchange pages (NSE / BSE for India), Yahoo Finance, Google Finance, company investor relations.
- Discount / Terminal Rates: Use WACC (if available) or conservative personal required return; regional GDP/inflation helps set terminal growth.
Below you can use the Discounted Cash Flow (DCF) method to estimate a company’s fair value per share. Includes global & Indian examples (Apple, Tesla, Infosys, Reliance), a sensitivity grid, and buy/hold/sell guidance.
So go ahead now and checkout your stock valuation by using the below intrinsic value calculator
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How the Discounted Cash Flow (DCF) Model Works
The DCF model converts a company’s expected future cash flows into today’s value using a discount rate. The process:
- Project FCFs for a fixed number of years (5–10).
- Discount each FCF to present value using the discount rate (e.g., WACC or required return).
- Calculate terminal value (value beyond projection using a perpetual growth formula).
- Sum the PVs to get enterprise value, then divide by shares to get intrinsic value per share.
Formulas (simplified):
Projected FCF in year n: FCFn = FCF0 × (1 + g)^n
Discounted PV of year n: PVn = FCFn / (1 + r)^n
Terminal Value (Gordon Growth): TV = FCFn × (1 + gt) / (r − gt)
Intrinsic value per share: (Σ PVn + PV(TV)) / Shares
Worked Examples — Global & Indian
Global Example — Apple (Hypothetical simplified example)
These are simplified, hypothetical numbers for demonstration only.
Base FCF (TTM) |
USD 20,000,000,000 |
Shares Outstanding |
16,000,000,000 |
Projection Years |
10 |
Growth (g) |
6% (conservative) |
Discount rate (r) |
9% |
Terminal growth (gt) |
2.5% |
Quick result (approx): Projected FCF grows to ≈ USD 35.8B in year 10. Discounted PV of projected FCFs might be ≈ USD 150B, PV of terminal ≈ USD 300B, total PV ≈ USD 450B → intrinsic per share ≈ USD 28.12.
Note: These numbers are illustrative only. Real Apple valuations use far more detailed cash flow models and real-time inputs.
Global Example — Tesla (Hypothetical)
For growth companies, use a higher growth rate and consider longer projection horizons if the business is reasonably predictable.
Base FCF (TTM) |
USD 5,000,000,000 |
Shares Outstanding |
1,000,000,000 |
Growth (g) |
20% |
Discount (r) |
12% |
Terminal growth |
3% |
Quick result (approx): High-growth projection yields higher terminal and PV values — intrinsic per share may be several times the current price depending on assumptions. Sensitivity to growth and discount is high — always run multiple scenarios.
Indian Example — Infosys (Hypothetical)
Indian examples use ₹ and often Lakh/Crore units for clarity.
Base FCF (last year) |
₹10,000 Crore |
Shares Outstanding |
3,500,000,000 |
Growth (g) |
12% |
Discount (r) |
11% |
Terminal growth |
3% |
Quick result (approx): A total PV in the range of several lakh crore could translate into an intrinsic value per share that you compare with the share price on NSE/BSE.
Indian Example — Reliance (Hypothetical)
Large diversified companies require special attention (group cash flows, non-core assets, debt).
Base FCF (last year) |
₹25,000 Crore |
Shares Outstanding |
6,500,000,000 |
Growth (g) |
10% |
Discount (r) |
12% |
Terminal growth |
3% |
Quick result (approx): Diversified cash flows mean you may want to value segments separately (energy, retail, digital) and then aggregate.
Sensitivity Analysis — Why ±2% Matters
Small changes in growth or discount rates can lead to large swings in intrinsic value. The calculator includes a sensitivity grid for growth ±2% (for example, 8%, 10%, 12%) so you can see how robust your valuation is.
- If intrinsic changes a little: Valuation is stable and more reliable.
- If intrinsic changes a lot: The result is sensitive — treat with caution, verify assumptions or consider multiple valuation methods.
Interpreting the Buy / Hold / Sell Signal
The tool compares Intrinsic Value per Share with the Current Market Price (CMP) and shows a signal based on percentage difference:
Strong Buy |
Intrinsic ≥ +20% vs CMP |
Buy |
Intrinsic ≥ +5% vs CMP |
Hold |
Intrinsic within ±5% of CMP |
Sell |
Intrinsic ≤ −5% vs CMP |
Strong Sell |
Intrinsic ≤ −20% vs CMP |
These are conservative default thresholds; you may adjust them to match your risk profile or editorial stance.
Pro Tips — Make Your DCF Smarter
- Use TTM FCF: Trailing twelve months FCF smooths seasonality and recent changes.
- Don’t overextend growth: Use higher growth for early years and taper for later years if appropriate.
- Run 3 scenarios: Conservative, Base, and Optimistic — then compare results.
- Check diluted shares: Options and dilution impact per-share value — use diluted shares outstanding.
- Combine methods: Compare DCF with P/E-based target price, P/B, and relative valuation for a full picture.
Common Mistakes & How to Avoid Them
- Wrong units: Entering FCF in rupees when it’s actually in crores — use the unit selector carefully.
- Unrealistic growth rates: Avoid assuming perpetual high growth; use reasonable tapering.
- Ignoring debt & cash: DCF gives enterprise value — for equity value adjust for net debt if necessary.
- Too short horizon: Very short projection periods can miss long-term value; very long horizons increase uncertainty.
Frequently Asked Questions (FAQ)
Q1 — Is DCF always accurate?
No. DCF is a disciplined framework but depends on the quality of inputs. Small changes in growth or discount rates can change results significantly. Use DCF as a guide, not a guarantee.
Q2 — What discount rate should I use?
Use your required rate of return or the company’s WACC. For many global equities, 8–12% is common; riskier companies require higher rates. For India, investors often use 10–14% depending on risk and inflation.
Q3 — Should I include non-operating assets?
DCF estimates enterprise value from operating cash flows. Add non-operating assets (excess cash, investments) and subtract debt to get equity value if needed.
Q4 — Where do I find FCF?
FCF = Cash from operating activities − Capital expenditures. Find it in the cash flow statement of annual reports or financial aggregators: Screener.in, Yahoo Finance, Moneycontrol.
Q5 — Should I change units (Lakh/Crore)?
Yes — use the unit selector to keep numbers readable. If per-share intrinsic value shows very low decimals (₹0.XX), consider switching FCF units to Lakh or Crore.
Conclusion
The Intrinsic Value (DCF) Calculator is a practical tool to convert assumptions about future cash flows into a single, comparable per-share number. Use it alongside other valuation methods and qualitative research to make well-rounded investment decisions.
Want a suggestion for next steps? Try running three scenarios (conservative/base/optimistic), then compare intrinsic per-share with market price and peer valuations before acting.
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