DCF Valuation Calculator
Calculate intrinsic stock value using the Discounted Cash Flow (DCF) method. Project future free cash flows, apply a discount rate, and determine fair value per share.
Cash Flow Inputs
Find this in the Cash Flow Statement
Historical growth rate or analyst estimate
Discount & Terminal Value
8-12% typical for stocks
Long-term GDP growth (2-3% typical)
Per-Share Calculation
Warren Buffett uses 25-50%
Valuation Results
Intrinsic Value Per Share
Based on 1.00B shares outstanding
Buy below this price for extra protection
Sensitivity Analysis
Small changes in discount rate significantly impact valuation:
Projected Free Cash Flows
| Year | Free Cash Flow | Discount Factor | Present Value |
|---|---|---|---|
| 1 | $5.50B | 1.100 | $5.00B |
| 2 | $6.05B | 1.210 | $5.00B |
| 3 | $6.66B | 1.331 | $5.00B |
| 4 | $7.32B | 1.464 | $5.00B |
| 5 | $8.05B | 1.611 | $5.00B |
| 6 | $8.86B | 1.772 | $5.00B |
| 7 | $9.74B | 1.949 | $5.00B |
| 8 | $10.72B | 2.144 | $5.00B |
| 9 | $11.79B | 2.358 | $5.00B |
| 10 | $12.97B | 2.594 | $5.00B |
| Terminal | $177.24B | — | $68.33B |
How DCF Valuation Works
Discounted Cash Flow (DCF) analysis is a valuation method that estimates the intrinsic value of an investment based on its expected future cash flows. The core principle: a dollar today is worth more than a dollar tomorrow, so future cash flows must be "discounted" to present value.
DCF Formula:
Intrinsic Value = Σ [FCFt / (1 + r)t] + Terminal Value / (1 + r)n
Where FCF = Free Cash Flow, r = Discount Rate (WACC), t = Year
Key Inputs Explained
Free Cash Flow (FCF)
Cash generated after capital expenditures. Find this on the Cash Flow Statement: Operating Cash Flow minus Capital Expenditures.
Discount Rate (WACC)
Weighted Average Cost of Capital represents the required return. Higher risk = higher discount rate. Typical range: 8-12% for stocks.
Growth Rate
Expected annual growth in FCF. Use historical growth, analyst estimates, or industry averages. Be conservative—high growth is hard to sustain.
Terminal Value
Value beyond the projection period, assuming perpetual growth. Uses the Gordon Growth Model: FCF × (1 + g) / (r - g). Terminal growth should not exceed GDP growth (2-3%).
Margin of Safety
Benjamin Graham and Warren Buffett emphasize buying below intrinsic value to provide a "margin of safety." A 25% margin means only buying if the stock trades at 75% or less of its calculated intrinsic value. This protects against estimation errors and unforeseen risks.
Limitations of DCF Analysis
- •Garbage in, garbage out: Results are only as good as your assumptions
- •Terminal value dominance: Often 60-80% of total value comes from terminal value
- •Sensitivity to discount rate: Small changes drastically alter valuations
- •Doesn't work for unprofitable companies: Negative FCF makes DCF challenging
Frequently Asked Questions
What discount rate should I use?▼
The discount rate should reflect the risk of the investment. For stable large-cap stocks, 8-10% is common. For riskier growth stocks, 10-15%. The discount rate represents your required rate of return—use a higher rate for riskier investments.
Where do I find Free Cash Flow?▼
Free Cash Flow is found on the Cash Flow Statement. Calculate it as: Operating Cash Flow minus Capital Expenditures (CapEx). Many financial sites report FCF directly. For Lician, visit the stock's "Financials" tab to see Cash Flow data.
Why is terminal value so large?▼
Terminal value captures all cash flows beyond your projection period—potentially decades of growth. It's typically 60-80% of total DCF value, which is why conservative terminal growth assumptions (2-3%) are critical. Never use terminal growth above long-term GDP growth.
How accurate is DCF valuation?▼
DCF is more of a thinking framework than a precise calculator. The value comes from understanding the drivers: What growth rate is implied? What's the market pricing in? Use DCF alongside other methods (P/E comparables, P/S ratios) for a complete picture.