DCF Valuation Calculator
Discount ten years of free cash flow to a per-share fair value, then flip the model around and read the growth rate the current price is already asking for.
Company inputs
Dollar figures in millions, taken straight off the cash flow statement and balance sheet.
Cash from operations minus capital expenditures.
Use the diluted count.
Cash and equivalents minus total debt. Negative if leveraged.
Used for upside and the reverse DCF.
Growth should fade. Few businesses hold a high rate for a decade.
8% to 10% for a stable large cap.
Cap this near long-run GDP growth. Nothing outgrows the economy forever.
Fair value per share
$90.17
+15.6% against the current price of $78.00
Enterprise value
$110.9B
PV of years 1-10
$44.9B
41% of the total.
PV of terminal value
$66B
59% of the total.
Growth the price implies
9.5%
Reverse DCF: first-stage growth needed to justify today's price.
At $78.00, the market is paying for roughly 9.5% annual free cash flow growth for five years, fading to 4.7% for the following five. You are forecasting 12.0%. You are forecasting more than the price requires, which is where the margin of safety in this position comes from.
Sensitivity
Fair value per share across discount rate and terminal growth. Green beats the current price, red does not.
| Discount rate | g = 1.5% | g = 2.0% | g = 2.5% | g = 3.0% | g = 3.5% |
|---|---|---|---|---|---|
| 7.50% | $105.29 | $111.55 | $119.07 | $128.25 | $139.73 |
| 8.25% | $92.71 | $97.31 | $102.71 | $109.14 | $116.93 |
| 9.00% | $82.69 | $86.16 | $90.17 | $94.85 | $100.38 |
| 9.75% | $74.53 | $77.21 | $80.26 | $83.77 | $87.83 |
| 10.50% | $67.76 | $69.86 | $72.24 | $74.93 | $78.00 |
The highlighted cell is your current assumption. Notice how far the value travels across one percentage point of discount rate. Anyone quoting a DCF fair value to the cent without showing you this grid is selling you false precision.
Projected cash flows
| Year | Free cash flow | Discounted to today |
|---|---|---|
| Year 1 | $4,704M | $4,316M |
| Year 2 | $5,268M | $4,434M |
| Year 3 | $5,901M | $4,556M |
| Year 4 | $6,609M | $4,682M |
| Year 5 | $7,402M | $4,811M |
| Year 6 | $7,846M | $4,678M |
| Year 7 | $8,317M | $4,550M |
| Year 8 | $8,816M | $4,424M |
| Year 9 | $9,345M | $4,303M |
| Year 10 | $9,905M | $4,184M |
Year 10 cash flow is worth 42% of its face value once discounted. That decay is the whole reason a distant turnaround story is worth less than it sounds.
Key takeaways
- A discounted cash flow model values a company as the sum of its future free cash flows, each divided by (1 + discount rate) raised to the number of years until it arrives.
- In a two-stage DCF, most of the value sits in the terminal value, which routinely accounts for 60% to 80% of the total, so the terminal growth rate deserves more scrutiny than the near-term forecast.
- A reverse DCF solves the model backwards: instead of asking what a stock is worth, it asks what growth rate the current price already requires, which is a far harder number to fool yourself about.
- Terminal growth must stay below the discount rate or the model divides by a negative number and returns nonsense; in practice terminal growth should not exceed long-run GDP growth of roughly 2% to 3%.
- Moving the discount rate by a single percentage point can change a DCF fair value by 15% to 25%, which is why a DCF is best read as a range and a sensitivity grid rather than a single price target.
Frequently asked questions
- How does a two-stage DCF work?
- A two-stage DCF projects free cash flow at one growth rate for the first five years, a second (usually lower) rate for years six through ten, then assumes cash flows grow forever at a modest terminal rate. Every projected year is discounted back to today at the discount rate, the terminal value is discounted back as well, and the sum is the enterprise value. Adding net cash and dividing by shares outstanding gives the per-share fair value.
- What discount rate should I use in a DCF?
- Use the weighted average cost of capital, which for a large, profitable US company typically lands between 8% and 10%. Raise it for smaller companies, heavier debt loads, or businesses whose cash flows are cyclical, and lower it only for genuine utility-like stability. If you are valuing equity for a personal portfolio, using your own required rate of return, often 10%, is a defensible shortcut.
- What is a reverse DCF and why is it more useful?
- A reverse DCF holds the current share price fixed and solves for the growth rate that would justify it. It is more useful because it converts a vague judgment ("this looks expensive") into a testable claim ("this price requires 19% free cash flow growth for a decade"). You then only have to answer whether that growth is plausible, which is a question you can actually research.
- Why does the terminal value dominate the result?
- Because it stands in for every year beyond the forecast window, which is most of a company's life. Even discounted back ten years, a perpetuity is a large number. When the terminal value is more than about 80% of your total, the model is really a bet on the perpetuity assumption, and the ten years of detailed forecasting in front of it are mostly decoration.
- What free cash flow number should I enter?
- Use levered free cash flow from the cash flow statement: cash from operations minus capital expenditures, for the trailing twelve months. Normalise it if the last year contained something unrepeatable, such as a large one-off legal settlement or an unusual working-capital swing. Companies with negative or wildly erratic free cash flow cannot be sensibly valued this way.
- How accurate is a DCF calculator?
- A DCF is precise but not accurate: it will return a number to the cent from inputs that are guesses. Its value is in forcing the assumptions into the open, not in producing a price target. Treat the sensitivity grid as the real output and the headline fair value as one cell inside it.