Stock Fair Value & DCF Calculator
Construct a transparent discounted cash-flow scenario with projected cash flows, terminal value and implied per-share valuation.
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How this tool works
Construct a transparent discounted cash-flow scenario with projected cash flows, terminal value and implied per-share valuation. Inputs should represent your own assumptions, current instrument specifications and account denomination; no automatic market-data feed is used unless the page explicitly states otherwise.
Enterprise value = present value of forecast free cash flows + present value of terminal value; equity value = enterprise value − net debt.
Worked example
Changing the assumed discount rate or terminal growth can materially alter the result: use multiple scenarios rather than one forecast.
What to check before relying on a result
Check the direction of the trade, units and currency, market contract specifications, realistic spreads and slippage, execution conditions, any applicable taxes and fees, and whether the assumed model fits your instrument. A calculator does not eliminate market risk.
Frequently asked questions
Is a DCF a stock-price prediction?
No. It is a valuation sensitivity model; future financial performance and market prices can be very different.
How should I enter net debt?
Enter debt minus excess cash in the same monetary units as free cash flow; negative net debt represents net cash.
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Explore professional trading courses →How does a discounted cash flow calculator estimate stock fair value?
A discounted cash flow (DCF) model estimates present enterprise value by discounting future free cash flow and a terminal value. The Traders MBA calculator projects five years of free cash flow using constant annual growth, then applies a Gordon growth terminal value. Net debt is deducted and the equity value is divided by the share count to estimate an indicative value per share.
How to use this calculator correctly
- Step 1. Enter a consistent annual free-cash-flow figure, expressed in millions of the valuation currency.
- Step 2. Choose five-year cash-flow growth and a discount rate appropriate to enterprise cash-flow valuation.
- Step 3. Set terminal growth below the discount rate, then enter net debt and shares outstanding in millions.
- Step 4. Compare the implied valuation with a market price if entered, and run sensitivity scenarios rather than relying on one estimate.
Worked comparisons
These are illustrative arithmetic examples, not forecasts or market quotations. They show how changing assumptions affects the calculation.
| Scenario (other inputs unchanged) | Discount rate | Terminal growth | Illustrative implied value/share |
|---|---|---|---|
| Base: £5,000m FCF, 7% growth, £2,000m net debt, 1,000m shares | 10.0% | 2.5% | £80.54 |
| Higher required return | 12.0% | 2.5% | £62.78 |
| Higher perpetual growth | 10.0% | 3.0% | £85.10 |
How to interpret the results
A large portion of modelled enterprise value may arise from the terminal value, which often makes the outcome extremely sensitive to assumptions only a few percentage points apart. A higher discount rate usually reduces the present value of future cash flows; a higher terminal growth estimate usually increases it. None of this establishes an attractive investment without assessing balance-sheet risk, capital intensity, cyclicality, dilution, competitive advantage and the realism of the free cash flow trajectory.
Common mistakes and limitations
- Cash flow, net debt, share count and market price must use consistent currency and unit conventions.
- If you use free cash flow to equity instead of enterprise free cash flow, subtracting net debt again can double-count financing effects.
- The simplified constant-growth model cannot capture multi-stage margin transitions, major acquisitions, share issuance or negative terminal economics automatically.
Further questions
Is intrinsic value the same as a price target?
No. It is an estimate conditional on model assumptions; the market can price risk and future information differently.
Why must the discount rate exceed terminal growth?
Otherwise the Gordon growth terminal-value denominator is zero or negative, invalidating this simplified perpetuity formulation.
Should I use diluted shares outstanding?
Dilution assumptions matter. Use an appropriately diluted share count when modelling future equity ownership, and keep it consistent with forecast periods.
Related Traders MBA learning and references
Read the relevant educational analysis, tools and primary-source specifications:
Figures are illustrative and depend on input assumptions. This material provides general education, not financial advice, trading signals or a forecast. Verify instruments, exchange or broker terms and execution costs before relying on a calculation.