π Intrinsic Value Calculator
What the shares are really worth.
Estimated intrinsic value per share
Estimates for planning only, not financial advice.
Intrinsic value is what a share is worth based on the cash it will generate, discounted to today: free cash flow per share times one plus growth, divided by the discount rate minus growth. With FCF of $3.20, growth of 4%, and a 10% discount rate, intrinsic value is $3.20 x 1.04 / 0.06 = $55.47 per share. If the market price sits below that, the stock may be undervalued.
How to Use This Calculator
Enter free cash flow per share (total FCF divided by diluted shares), your perpetual growth estimate, and the discount rate reflecting the risk. The calculator applies the Gordon growth version of DCF.
Enter FCF per share from the latest twelve months.
Enter a sustainable long-run growth rate, usually 2% to 5%.
Enter the discount rate and read intrinsic value. For a quick Graham-style ceiling, see our Graham number calculator.
The DCF Formula
This is the Gordon growth model: the present value of a cash flow growing forever at rate g, discounted at r. It assumes the business has reached steady state, which is why professionals use it for the terminal value after an explicit forecast period rather than for the whole valuation. The denominator does the heavy lifting: a 1-point change in the discount rate or growth rate swings the answer dramatically, so the output is only as honest as those two inputs.
Worked Example
FCF per share of $3.20, growth of 4%, discount rate of 10%: next year's FCF is $3.328, divided by (0.10 - 0.04) = 0.06, giving $55.47. If the stock trades at $40, the model implies about 39% upside. Now stress it: raise the discount rate to 12% and value falls to $41.60; cut growth to 2% and it falls to $40.80. The same company, the same cash flow, three defensible answers. That sensitivity is the model's warning label.
Using Intrinsic Value Honestly
Three rules keep DCF honest. First, growth cannot exceed the economy's growth forever; cap it near nominal GDP growth, around 4-5%. Second, the discount rate should reflect risk: 8-10% for stable large caps, higher for cyclicals and small caps. Third, demand a margin of safety: Buffett-style investors buy at 70-80% of computed value because the inputs are estimates. A DCF that only works with heroic assumptions is telling you not to buy.
My practice: run three scenarios, bear, base, and bull, and weight them. If the stock is cheap only in the bull case, pass. If it is cheap even in the bear case, you may have found something. And always check the answer against cash returns: our free cash flow calculator verifies the FCF figure the whole model rests on.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is intrinsic value?
The value of an asset based on its expected future cash flows, discounted to the present. For stocks, it is what the shares are worth apart from market price; buying below it is value investing's core idea.
How do you calculate intrinsic value?
Project future free cash flows and discount them at a rate reflecting risk, then sum the present values. The single-stage Gordon model used here simplifies that to FCF x (1+g) / (r-g) for mature businesses.
What discount rate should I use?
The opportunity cost of capital: 8-10% for stable large caps, higher for riskier firms. Many investors use a flat 10% hurdle or the company's WACC. The rate should exceed the growth rate or the math breaks.
What growth rate is reasonable?
Perpetual growth cannot exceed long-run nominal GDP growth, roughly 4-5%. Mature firms: 2-3%. Anything above 6% forever implies the company eventually becomes the entire economy.
What is margin of safety?
Buying below intrinsic value to protect against estimation error. A 20-30% discount to computed value is the classic cushion. The less certain the inputs, the bigger the cushion should be.
Why do DCF valuations vary so much?
Because value concentrates in the terminal value, which depends on small differences between r and g. A one-point move in either can shift the answer 20% or more. Sensitivity analysis is mandatory, not optional.
Is DCF better than multiples?
It is more rigorous but more assumption-heavy. Multiples like P/E borrow the market's judgment; DCF builds your own. Professionals use both and get suspicious when they disagree sharply.
Can intrinsic value be negative?
For equity, effectively no: limited liability floors it near zero. A DCF can imply negative enterprise value for distressed firms, but equity holders can walk away, so the practical floor is zero.
What is terminal value in a DCF?
The value of all cash flows beyond the explicit forecast period, usually via the Gordon model used here. It often makes up 70% or more of a DCF, which is why the growth and discount assumptions deserve most of your skepticism.