Discounted Cash Flow (DCF) Calculator
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Discounted Cash Flow (DCF) Calculator: guide
Calculator description
The DCF Calculator estimates what a company's shares are intrinsically worth today, based on the cash it is expected to generate in the future. You enter a handful of inputs — the company's current free cash flow, how fast you expect that cash flow to grow, and the rate you'd want to be compensated for the risk of waiting for it — and the calculator projects those cash flows forward, discounts each one back to today's dollars, and divides the result by the number of shares outstanding to arrive at a per-share value. It also plots the projected cash flows against their discounted present values, and compares the resulting intrinsic value to the current market price so you can see at a glance whether a stock looks cheap, fairly priced, or expensive relative to your own assumptions.
The purpose
Stock prices reflect what the market collectively believes a company is worth, but that belief can be wrong in either direction — driven by sentiment, short-term news, or momentum rather than the business's underlying economics. A DCF model is a way of stepping back from the price and asking a more fundamental question: "if I owned this entire company and collected all of its future cash flow, what would that stream of cash actually be worth to me today?"
This calculator exists to make that exercise fast and transparent. Rather than building a spreadsheet from scratch, you can plug in your assumptions, immediately see the resulting valuation, and adjust individual inputs to understand which assumptions are doing the most work. It is a tool for building an independent, assumption-driven view of value — not a substitute for research into the company itself.
Input sections explained
- Stock ticker
- The company's exchange symbol (e.g. AAPL, MSFT). This is a label for reference only and does not affect the calculation.
- Current stock price
- Today's market price per share, entered manually. This is used only for comparison — to calculate the upside or downside between the intrinsic value the model produces and what the market currently charges. It does not feed into the valuation math itself.
- Latest annual free cash flow (millions)
- The company's most recent twelve months of free cash flow (operating cash flow minus capital expenditures), in millions of dollars. This is the starting point that every future year's cash flow is projected from, so accuracy here matters more than almost any other input.
- Expected FCF growth rate, Yr 1–5
- Your assumed annual growth rate for free cash flow over the first five years, usually anchored to the company's recent momentum or analyst estimates.
- Expected FCF growth rate, Yr 6–10
- A second, typically more conservative growth rate for years six through ten, reflecting the tendency of growth to moderate as a company matures and its revenue base gets larger.
- Expected FCF growth rate, Yr 11 and beyond
- Only shown if the projection period is extended past ten years. A third, further-moderated growth rate applied to every year from year eleven through the end of the projection period, bridging the gap down toward the terminal growth rate.
- Terminal growth rate
- The steady growth rate assumed to continue forever after the projection period ends, typically set close to long-run GDP or inflation (roughly 2–3%). It must be lower than the discount rate, or the terminal value calculation becomes mathematically undefined.
- Discount rate / WACC
- The weighted average cost of capital — the rate used to convert future cash flows into today's dollars. It represents the return an investor would require given the company's risk profile, blending its cost of equity and cost of debt.
- Projection period (years)
- How many years of explicit, year-by-year forecasts to build before switching to the terminal growth assumption. The minimum is ten years, since the two default growth stages already span that period.
- Shares outstanding (millions)
- The total number of shares currently outstanding, used to convert total equity value into a per-share figure.
- Net debt (millions)
- Total debt minus cash and cash equivalents. This is subtracted from enterprise value to arrive at the value that belongs to shareholders specifically, rather than to the company as a whole (which includes creditors' claims).
Formula
The calculator builds the valuation in three steps.
1. Present value of the projected cash flows. Each year's projected free cash flow is discounted back to today at the discount rate:
Enterprise Value (explicit period) = Σ [ FCF_t ÷ (1 + r)^t ] for t = 1 to N
where FCF_t is the projected free cash flow in year t, r is the discount rate, and N is the length of the projection period.
2. Terminal value. Cash flows don't stop after the projection period, so a terminal value captures everything beyond year N using the Gordon Growth Model, then discounts that lump sum back to today:
Terminal Value = [ FCF_N × (1 + g) ] ÷ (r − g) PV of Terminal Value = Terminal Value ÷ (1 + r)^N
where g is the terminal growth rate.
3. Per-share value. The two pieces are combined and converted to a per-share figure:
Enterprise Value = PV of explicit cash flows + PV of Terminal Value Equity Value = Enterprise Value − Net Debt Intrinsic Value per Share = Equity Value ÷ Shares Outstanding
Worked example
Consider a hypothetical company, Example Co. (ticker: XYZ), currently trading at $52.00 per share, with the following inputs:
| Latest annual free cash flow | $500M |
| Growth rate, Yr 1–5 | 8% |
| Growth rate, Yr 6–10 | 5% |
| Terminal growth rate | 2.5% |
| Discount rate (WACC) | 8% |
| Projection period | 10 years |
| Shares outstanding | 200M |
| Net debt | $1,000M |
Free cash flow grows from $500M in year 0 to roughly $735M by year 5 (8% annual growth), then to roughly $938M by year 10 (5% annual growth). Discounting each of those ten years' cash flows back at 8% and summing them gives a present value of approximately $4,800M for the explicit forecast period.
The year-10 cash flow of $938M is then grown one more year at the 2.5% terminal rate and divided by (8% − 2.5%) to produce a terminal value of roughly $17,479M, which discounts back to a present value of approximately $8,097M.
Adding the two components gives an enterprise value of about $12,897M. Subtracting $1,000M of net debt leaves an equity value of approximately $11,897M, which divided across 200M shares produces an intrinsic value of roughly $59.48 per share.
Compared to the current price of $52.00, that implies an upside of about +14.4% — suggesting the market may be undervaluing Example Co. relative to these particular growth and discount rate assumptions. A different, more conservative set of assumptions could easily narrow or reverse that gap, which is the point of testing several scenarios rather than relying on a single run.
Frequently asked questions
What is a DCF, and why use it instead of just looking at the stock price?
A DCF estimates a company's value from first principles — the actual cash it's expected to produce — rather than from what other investors currently think it's worth. The market price can be pushed around by sentiment or short-term news; a DCF forces an explicit, examinable set of assumptions about growth and risk, which makes it easier to spot when a price looks disconnected from the underlying business.
Where do I find free cash flow, growth rate, and WACC figures for a real company?
Free cash flow (operating cash flow minus capital expenditures) is available on a company's cash flow statement or on financial data sites like Yahoo Finance, often labeled "levered free cash flow." Growth estimates can be drawn from a company's own historical trend or from analyst consensus estimates. Pre-calculated WACC figures are published by sites such as stockanalysis.com, or can be built manually from the company's cost of equity and cost of debt.
Why does the calculator use two or three growth stages instead of one constant rate?
Very few companies grow at a single fixed rate indefinitely. Fast-growing companies tend to slow as they mature, their revenue base gets larger, and competition catches up. Splitting the projection into a faster near-term stage, a moderating middle stage, and (optionally) a further-fading late stage produces a more realistic glide path toward the slow, steady terminal growth rate than a flat assumption would.
My result is wildly different from the current stock price — does that mean the market is wrong?
Not necessarily. DCF valuations are highly sensitive to small changes in growth rates and the discount rate, so a large gap often just means one or more inputs are more optimistic or pessimistic than what the market is pricing in. It's worth testing a range of assumptions — a base case, a conservative case, and an optimistic case — rather than treating any single output as a definitive verdict on whether a stock is mispriced.
Is this tool giving me financial advice?
No. It performs a calculation based entirely on the numbers you supply. The quality of the output depends entirely on the quality and reasonableness of your inputs, and the model cannot account for factors like competitive dynamics, management quality, regulatory risk, or macroeconomic shifts. See the disclaimer below.
Disclaimer
This calculator is provided for educational and informational purposes only. It performs a mathematical projection based solely on the assumptions you enter, and does not constitute investment, financial, tax, or legal advice, nor a recommendation to buy, hold, or sell any security. Discounted cash flow valuations are highly sensitive to their input assumptions — small changes in growth rates or the discount rate can produce large swings in the resulting valuation — and real-world outcomes routinely diverge from any model's projections. Past performance and current estimates are not guarantees of future results. Before making any investment decision, consult a licensed financial advisor and conduct your own independent research.