DCF Calculator
Use consistent units. If you enter free cash flow and net debt in millions, keep both in millions. Per-share value remains valid as long as shares use the same scale.
What Is a Discounted Cash Flow Valuation?
A discounted cash flow (DCF) valuation estimates what a business is worth today based on the cash it can generate in the future. Instead of relying only on market multiples, DCF analysis focuses on fundamentals: free cash flow growth, risk (discount rate), and long-term sustainability.
The core idea is simple: a dollar received in the future is worth less than a dollar today. DCF converts future cash flows into present value, then adds them up to estimate enterprise value and equity value.
How This DCF Calculator Works
1) Forecast future free cash flow
The calculator starts from your current free cash flow and compounds it using your growth rate for the selected projection period.
2) Discount each year back to present value
Each projected cash flow is discounted by your WACC (or required return), reflecting business and capital structure risk.
3) Estimate terminal value
After the explicit forecast period, the model assumes cash flows grow at a stable terminal rate:
Terminal Value = FCF(n + 1) / (Discount Rate - Terminal Growth Rate)
4) Convert enterprise value to per-share intrinsic value
- Enterprise Value = Present value of forecast period + Present value of terminal value
- Equity Value = Enterprise Value - Net Debt
- Intrinsic Value Per Share = Equity Value / Shares Outstanding
Input Guide: Setting Better Assumptions
Current Free Cash Flow
Use normalized free cash flow if possible. If the latest year was unusually high or low, adjust to a mid-cycle number.
Growth Rate (Years 1-N)
Match this to business reality. Mature companies often support modest growth, while younger firms may justify higher growth for limited periods.
Discount Rate (WACC)
This is one of the most sensitive inputs. Higher risk should imply a higher discount rate, which lowers valuation.
Terminal Growth Rate
Keep this conservative. In many cases, 2% to 3% is a realistic long-run range in line with inflation and GDP trends.
Net Debt and Shares Outstanding
Net debt adjusts enterprise value to equity value. Shares outstanding converts company-level value into per-share value for investment decisions.
Common DCF Mistakes to Avoid
- Using an aggressive growth rate and a low discount rate at the same time.
- Setting terminal growth too close to discount rate (this can explode terminal value unrealistically).
- Ignoring dilution from stock-based compensation.
- Forgetting to adjust for net debt.
- Treating one scenario as a certainty instead of a range of outcomes.
Why Sensitivity Analysis Matters
DCF is not a single “true” number; it is a framework. Small assumption changes can materially shift fair value estimates. Use this calculator multiple times with conservative, base, and optimistic assumptions.
- Bear case: lower growth + higher discount rate
- Base case: realistic assumptions tied to business quality
- Bull case: stronger growth + stable risk profile
Interpreting Your Output
Focus on intrinsic value per share and your margin-of-safety value. If market price is meaningfully below your conservative estimate, that may signal potential undervaluation. If market price is far above intrinsic value, expected returns may be lower unless growth surprises to the upside.
Remember: valuation is part science, part judgment. Combine DCF with competitive analysis, management quality, balance sheet strength, and industry structure.
Final Thoughts
A discounted cash flow valuation calculator helps you think like a long-term business owner. It pushes you to articulate assumptions clearly, test scenarios, and make decisions with discipline rather than emotion. Use it as a decision support tool—not as a guarantee.
Educational use only. This is not investment advice.