Match the cash flow to the discount rate
Equity cash flows are discounted at the cost of equity. Cash flows to the whole firm require a cost of capital that includes debt financing. Mixing the two can distort valuation. This calculator uses the equity approach; it does not compute WACC or an enterprise value.
Review the inputs before interpreting a value
- Search and select a symbol. Check the annual statement date, quote timestamp, currency and share-count basis.
- Review the imported free cash flow. Adjust the base cash flow for net borrowing and other items needed to represent sustainable cash available to equity holders. The imported number is a starting proxy, not an independently verified FCFE estimate.
- Set five-year growth, perpetual growth and an equity discount rate in the same currency and nominal terms. Defaults are examples, not estimates derived from today’s interest rates or historical growth.
- Compare several scenarios. A large terminal-value share means the result depends heavily on assumptions beyond the explicit five-year forecast.
The formula used here
For years 1–5, cash flow equals base cash flow × (1 + growth)^year. Each year is discounted by (1 + equity discount rate)^year. Terminal value equals year-5 cash flow × (1 + terminal growth) ÷ (discount rate − terminal growth), discounted back five years. The sum is divided by the fixed share count. Rates in this formula are decimals.
Cash flows arrive at year-end. The model assumes a constant growth rate in each stage and a perpetual terminal cash flow. It does not model future dilution, repurchases, changing leverage, preferred claims or separate excess cash. It does not subtract net debt from an equity value.
Standard and reverse DCF answer different questions
Standard mode estimates a conditional value per share. The displayed price discount is (model value − reference price) ÷ model value; it is not the return you will earn. Reverse mode holds the cash-flow base, discount rate, terminal growth and shares fixed, then searches for a five-year growth rate that matches the reference quote. Many other combinations of assumptions can match the same price.
Data and methodology sources
Provider coverage, reporting conventions and stale or incomplete inputs can change the result. Check the issuer’s filings before making an investment decision. These scenarios are educational estimates, not investment recommendations.