DCF Calculator
Value a stock from the cash it produces: start from last year's free cash flow, then set the growth, the discount rate and the growth after year ten. New to DCF? Read the guide.
An example company: free cash flow $10.0B, cash $20.0B, debt $10.0B, 1.0B diluted shares. Price $150.00.
The example company opens at 8% a year for five years, half that for the next five. Bear and bull sit 5 points either side.
Bear · Base · Bull
| Case | Growth | Rate | Value |
|---|---|---|---|
| Bear | 3% → 1.5% | 11% | $126.5316% below |
| Base | 8% → 4% | 10% | $190.2027% above |
| Bull | 13% → 6.5% | 9% | $304.70103% above |
From the business to one share
| Years 1–10, worth today | $86.0B |
|---|---|
| After year 10 $244.3B in year 10, discounted | + $94.2B |
| Enterprise value | $180.2B |
| Cash | + $20.0B |
| Debt | − $10.0B |
| Equity value | $190.2B |
| ÷ 1.0B shares | $190.20 |
The cash, year by year
What moves it most
| Rate | −2% | 3% | 8% | 13% | 18% |
|---|---|---|---|---|---|
| 8.0% | 170 | 210 | 259 | 317 | 386 |
| 9.0% | 146 | 179 | 219 | 267 | 324 |
| 10.0% | 128 | 156 | 190 | 231 | 279 |
| 11.0% | 114 | 138 | 168 | 203 | 245 |
| 12.0% | 103 | 125 | 151 | 181 | 218 |
Green: at or above the share price. Shaded: your answer.
Other ways to value it from the cash
How the calculation works
1 · Project the cash
Free cash flow is operating cash flow minus capital spending: the cash a business could hand its owners after keeping itself going. It grows at your first rate for five years, then at your second for five more.
2 · Discount it
A dollar in year n is worth 1 ÷ (1 + r)ⁿ today, r being the return you require. At 10%, a dollar five years out is worth 62 cents now, and one ten years out 39 cents.
3 · Value what comes after
After year ten the cash keeps growing at a slow, steady rate forever. That stream is worth year ten's cash × (1 + g) ÷ (r − g), discounted back like any other year. Keep g below long-run economic growth, around 2–3%.
4 · From the business to a share
The discounted cash flows plus the discounted value after year ten are the enterprise value. Add cash, subtract debt and you have the equity; divide by the diluted shares for a value per share.
Rather end with a sale at a multiple of EBITDA? The exit-multiple version does that. The facts for a covered stock are the latest fiscal year's filed statements, read the same way as the reverse DCF, which runs this sum backwards: the growth the price already assumes.
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Questions
What is a DCF?
A discounted cash flow valuation adds up the cash a business will produce in the future, each year's cash shrunk by the return you could earn elsewhere while you wait. The total, less debt and plus cash, divided by the shares, is a value per share.
Why does this calculator not use analyst forecasts?
Because the point is to see your own assumptions. It starts from the free cash flow the company last reported and grows it at the rates you type, so every number that moves the answer is one you can check on a filing or chose yourself.
What discount rate should I use?
The return you require from the stock. 10% is a common anchor: roughly what the US stock market has returned a year over the long run, so a stock has to beat it to be worth picking. A riskier business deserves more, a steadier one a little less.
Why does most of the value come from the terminal value?
Ten years of cash flow is a small part of a business that keeps going. The terminal value stands for every year after the tenth, so it is usually more than half the answer — which is why the terminal growth rate should stay below long-run economic growth, around 2–3%.
Can the years after ten be valued another way?
Yes: by assuming the business is sold in year ten at a multiple of its EBITDA, the way bankers often do it. That version has a page of its own, the exit-multiple calculator, which sets the two side by side.
Is the value a price target?
No. It is what your assumptions imply, nothing more. Change the growth by five points or the discount rate by one and the value moves a lot; the sensitivity table shows by how much. It is a tool for thinking, not investment advice.
For education only. The value is what the inputs on this page imply; it is not a forecast, a price target or investment advice.