πΉ DCF Calculator
What a business is worth based on its future cash.
Estimated intrinsic value per share
Estimates for planning only, not financial advice.
A discounted cash flow model values a business by projecting its future free cash flows and discounting them back to today. Money in the future is worth less than money now, so each projected dollar is shrunk by the discount rate, usually the weighted average cost of capital. Add the discounted flows to a terminal value, subtract net debt, divide by shares, and you have an intrinsic value per share to compare against the market price.
How to Use This Calculator
Enter current free cash flow, your growth assumption for the next five years, the discount rate, and a perpetual terminal growth rate. Then add net debt and shares outstanding to move from enterprise value to a per-share figure. The model uses a standard two-stage DCF: five explicit forecast years plus a Gordon-growth terminal value.
Enter current free cash flow, ideally a normalized figure rather than one distorted year. Start from operating cash flow minus maintenance capex.
Set the five-year growth rate and the discount rate. The discount rate should exceed the terminal growth rate, or the math breaks.
Add net debt (debt minus cash) and shares outstanding to convert enterprise value into equity value per share, then compare with the market price.
The DCF Formula
The terminal value usually dominates the answer, often 60 to 80 percent of it, which is both the strength and the weakness of DCF. The model is precise about the mechanics and honest about the uncertainty: small changes in the discount rate or terminal growth swing the value enormously. Treat the output as a range to explore, not a price target to defend. If the shares pay a steady dividend instead, our dividend discount model is the simpler sibling.
Worked Example
A company generates $10M of free cash flow, growing 12 percent a year for five years, discounted at 10 percent with 3 percent terminal growth. Year-5 cash flow reaches $17.6M. The five discounted flows sum to $52.8M; the terminal value is $259.3M, worth $161.0M today. Enterprise value is $213.8M. Subtract $8M of net debt and divide by 20M shares: $10.29 per share. Notice the terminal value is about 75 percent of the total, which is normal and worth remembering before trusting the third decimal.
Reading Your Result
| Check | What to do |
|---|---|
| Value well above market price | Stress-test growth and discount rate before calling it cheap |
| Value near market price | The market agrees with your assumptions, for now |
| Value well below market price | The market is pricing faster growth or lower risk than you are |
| Terminal share above 85 percent | Your answer is really a terminal-growth bet, extend the forecast |
Common Mistakes
Using net income instead of free cash flow is the classic error; earnings ignore capex and working capital. Setting terminal growth above long-run GDP growth implies the company eventually owns the economy. And forgetting net debt turns an enterprise value into a per-share fantasy. For a reality check on the discount rate itself, build it from components with our discount rate calculator, and sanity-check the growth story against the IRR the investment implies.
Which Assumption Moves the Answer Most
Run the sensitivity before trusting the headline. On the worked example, cutting the discount rate from 10 to 9 percent lifts the per-share value from $10.29 to about $12.15, while cutting the five-year growth rate from 12 to 10 percent only drops it to about $9.46. The discount rate dominates because it compounds across every year including the terminal value. That tells you where to spend your research time: on the risk and cost-of-capital story, not on fine-tuning year-four growth by a point.
Terminal growth deserves the same scrutiny. Moving it from 3 to 4 percent adds about $1.43 a share in the example, which is a large reward for an assumption nobody can verify. Cap it at long-run nominal GDP growth and consider showing two cases, one at 2 percent and one at 3 percent, so readers see the range. A valuation presented as a single precise number is advertising; a valuation presented as a range with named assumptions is analysis.
Build three cases, not one. A bear case with slower growth and a higher discount rate, a base case with your best estimates, and a bull case where the growth story fully plays out gives you a range like $7.50 to $13.00 around the $10.29 base. If the market price sits inside your range, the stock is fairly priced on your own assumptions and the decision becomes about conviction in the upside case. Ranges force honesty about uncertainty in a way point estimates never do.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is a DCF valuation?
A discounted cash flow valuation estimates what a business is worth by projecting its future free cash flows and discounting them to present value. It is the standard intrinsic-value method in corporate finance, built on the idea that a company is worth the cash it will generate.
How do you calculate DCF?
Project free cash flow for five to ten years, discount each year at the WACC, add a terminal value for all years beyond the forecast, and sum them for enterprise value. Subtract net debt and divide by shares for a per-share value.
What is terminal value in DCF?
The terminal value captures all cash flows beyond the explicit forecast, usually via the Gordon growth formula: final-year cash flow grown once more, divided by the discount rate minus perpetual growth. It typically makes up 60 to 80 percent of the total value.
What discount rate should I use?
Usually the weighted average cost of capital (WACC), which blends the cost of equity and after-tax cost of debt. Riskier companies get higher discount rates, which shrink the present value. Small changes here move the answer a lot.
What is a good terminal growth rate?
At or below long-run nominal GDP growth, typically 2 to 4 percent for a US company. Anything higher implies the firm eventually outgrows the economy, which cannot hold forever. It must also stay below the discount rate.
Should I use free cash flow or net income?
Free cash flow. Net income ignores capital spending and working capital swings, so it overstates what owners can actually take out. Start from operating cash flow and subtract maintenance capex for the cleanest figure.
Why is my DCF value so sensitive to inputs?
Because compounding magnifies small differences over long horizons, and the terminal value dominates. A one-point change in the discount rate can move the answer 15 to 25 percent. That sensitivity is information: it tells you which assumptions actually matter.
How does DCF differ from the dividend discount model?
DCF values all free cash flow to the firm, while the dividend discount model values only the dividends paid to shareholders. DCF suits any company; the dividend model suits mature dividend payers. Both discount future cash to the present.
Can DCF value a company with negative cash flow?
Yes, but carefully. Project the path to positive cash flow explicitly and discount it, or the model produces nonsense. Early-stage and turnaround valuations lean heavily on the forecast years, so scenario analysis matters more than precision.
What are the biggest DCF mistakes?
Using earnings instead of cash flow, aggressive terminal growth, a discount rate that does not match the risk, forgetting to subtract net debt, and presenting a point estimate instead of a range. Run bull, base, and bear cases instead of one number.