DCF Stock Valuation Calculator

Estimate the intrinsic value of a stock using the Discounted Cash Flow (DCF) method.

Earnings Per Share (EPS) ($)

Growth Rate (%)

Discount Rate (%)

3 Years5 Years10 Years15 Years Forecast Period (Years)

Terminal Growth Rate (%)

DCF Calculator – Discounted Cash Flow Valuation

Wondering how much a stock is really worth? The Discounted Cash Flow (DCF) Calculator helps you determine the intrinsic value of a stock based on future cash flows. By discounting projected earnings back to the present value, you can make informed investment decisions and avoid overpaying for stocks.

What is the DCF Method?

The Discounted Cash Flow (DCF) valuation method is a widely used financial model that estimates the value of a stock by forecasting its future earnings and adjusting them for time value. This method is based on the principle that a dollar today is worth more than a dollar in the future.

🧮 DCF Formula

The formula for calculating the present value of future cash flows is:

DCF = (CF1 / (1 + r)¹) + (CF2 / (1 + r)²) + ... + (CFn / (1 + r)^n)

• CF – Future Cash Flows
• r – Discount Rate (required rate of return)
• n – Number of years

Our calculator simplifies this process, allowing you to quickly determine the estimated value of a stock.

How to Use the DCF Calculator?

Follow these simple steps to calculate the intrinsic value of a stock:

1. Enter the Earnings Per Share (EPS) – This represents the company's annual profit per share.
2. Set the Growth Rate (%) – Estimate how much the company’s earnings will grow each year.
3. Choose the Forecast Period (Years) – Define how many years you want to project earnings.
4. Set the Discount Rate (%) – This is your required rate of return (e.g., 8-10%).
5. Set the Terminal Growth Rate (%) – Expected long-term growth beyond the forecast period.
6. Click "Calculate" to get the intrinsic value per share.

📊 Understanding the Results

Once you hit calculate, the tool will return:

• Intrinsic Value Per Share – The estimated fair value of the stock.
• Projected Future EPS – Growth of earnings over the years.
• Discounted EPS Flow – The present value of those earnings.
• DCF Valuation Chart – A visual representation of stock value growth.
• Terminal Value in the table is a future projection, not today's value.

Why is DCF Important?

DCF valuation is one of the most accurate methods of stock valuation because it focuses on fundamentals rather than market speculation. It helps investors:

• Determine whether a stock is undervalued or overvalued.
• Compare stocks based on their actual financial performance.
• Make better long-term investment decisions.

Limitations of DCF Valuation

While the DCF method is powerful, it has some drawbacks:

• Forecasting future earnings can be uncertain.
• The model is sensitive to the discount rate.
• Assumptions about long-term growth may not always be accurate.

Example: Real-World DCF Valuation

Let’s assume a company has an EPS of $5, a growth rate of 10%, and a discount rate of 8%. If we forecast for 10 years, our calculator will estimate the fair stock price. Compare this with the actual market price to determine if it's a good investment.

Frequently Asked Questions (FAQ)

Is DCF valuation accurate?

DCF provides a strong estimate, but accuracy depends on the inputs used (growth rate, discount rate, etc.).

What discount rate should I use?

Typically, investors use a discount rate between 8% and 12%, depending on risk and opportunity costs.

How do I interpret the intrinsic value?

If the calculated intrinsic value is higher than the current stock price, the stock may be undervalued. If it's lower, the stock might be overvalued.

Should I use DCF for all stocks?

DCF works best for companies with stable cash flows. It's less reliable for startups or highly volatile stocks.

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