DCF Calculator: Stock Fair Value
Enter a company's cash flow per share and your growth guesses. See what the shares could be worth today, and how much the answer changes if your guesses are off.
What we noticed
Year by year
How this calculator works
A discounted cash flow (DCF) values a company by adding up the cash it could pay its owners in the future, and bringing each amount back to today's money. Cash that comes later is worth less, so each year is divided by (1 + your return) for every year you wait.
Each year's cash is counted at the end of that year. We grow your cash flow per share for 5 years at the first growth rate, then 5 years at the second rate. After year 10, we assume it grows at a steady long-term rate forever, and add that value too. The total is the estimated value per share.
The formulas here are standard finance methods. The linked pages explain annual return and compound growth, not the DCF method itself.
The answer depends heavily on your guesses. That is why we show a table of values at different discount rates and long-term growth rates. The result ignores a company's debt, changes in the number of shares and pay in shares, and it does not suit banks or insurers. This is an education tool, not advice to buy or sell any stock.
Starting points some investors use (not rules)
| Growth, years 1 to 5 | Close to what the company has done, not more |
|---|---|
| Growth, years 6 to 10 | Lower than the first 5 years |
| Long-term growth | 2% to 3%, no higher than the economy |
| Return you want | Many investors use 8% to 10% for stocks |
| Margin of safety | Some investors use 10% to 30% |
Sources: Background reading, Investor.gov: Annual return, Background reading, Investor.gov: Compound interest
Frequently asked questions
What is a DCF?
A discounted cash flow values an investment by adding up the cash it should produce in the future, with later cash counted as worth less than cash today.
What is free cash flow?
It is the cash a company has left after paying its running costs and the money it needs to invest in the business. You can find it in the cash flow statement in a company's annual report.
What discount rate should I use?
It is the yearly return you want from the investment. Some investors use 8% to 10% for stocks. A higher rate is more careful and gives a lower value.
What is a margin of safety?
A cushion between the value you estimate and the price you are willing to pay. It protects you if your guesses were too hopeful.
Is the result a prediction?
No. It shows what the shares are worth if your guesses are right. Change the inputs and you get a different answer, which is the point of the exercise.