Stock DCF Valuation Calculator
Estimates the intrinsic value of a stock by discounting projected free cash flows back to today's dollars. Use it when deciding whether a stock is overvalued or undervalued relative to its fundamentals.
Last updated: September 2026
Formula below · 2 sources (investor.gov, Wikipedia) · Updated Sep 2026
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About this calculator
Discounted Cash Flow (DCF) valuation projects a company's future free cash flow and discounts it back to a present value using a required rate of return (WACC). This calculator uses a standard two-stage model. Stage 1: free cash flow grows at your annual growth rate for five years, FCFₜ = FCF₀ × (1 + g)ᵗ, and each year is discounted to today: PVₜ = FCFₜ / (1 + WACC)ᵗ. Stage 2: the terminal value — all cash flows beyond year 5 — uses the Gordon Growth Model, Terminal Value = FCF₅ × (1 + g_terminal) / (WACC − g_terminal), and is also discounted back five years: PV(TV) = TV / (1 + WACC)⁵. Intrinsic equity value per share = (sum of the five discounted cash flows + discounted terminal value) / shares outstanding. The model needs WACC to be higher than the terminal growth rate; otherwise the terminal value is infinite and the calculator asks you to adjust the inputs. It treats free cash flow as cash available to shareholders, so for a company with significant net debt you should subtract that debt from the total before dividing by shares. If the intrinsic value exceeds the current market price, the stock may be undervalued. WACC is the most sensitive input — small changes in discount rate or growth assumptions can dramatically alter the output.
How to use
Assume: Current FCF = $500M, Annual Growth Rate = 10%, Discount Rate (WACC) = 8%, Terminal Growth Rate = 3%, Shares Outstanding = 100M. Step 1 — Project and discount five years of FCF: $550M / 1.08 = $509.3M; $605M / 1.08² = $518.7M; $665.5M / 1.08³ = $528.3M; $732.1M / 1.08⁴ = $538.1M; $805.3M / 1.08⁵ = $548.0M. Sum ≈ $2,642.4M. Step 2 — Terminal value at year 5: $805.26M × 1.03 / (0.08 − 0.03) = $16,588.3M, discounted to today: $16,588.3M / 1.08⁵ = $11,289.7M. Step 3 — Total equity value ≈ $2,642.4M + $11,289.7M = $13,932.1M. Step 4 — Intrinsic value per share = $13,932.1M / 100M shares ≈ $139.32. If the stock trades at $130, it appears modestly undervalued (about $9 per share) on these assumptions. Note how the discounted terminal value is about 81% of the total — typical of DCF models and why the terminal growth and discount rates matter so much.
Frequently asked questions
What discount rate should I use in a DCF stock valuation?
The discount rate should reflect the risk of the investment, typically approximated by WACC for the company being analyzed. For large-cap US stocks, WACC commonly falls between 7% and 12%. Higher-risk or small-cap companies warrant higher discount rates, often 12–15%. Using a rate that is too low overstates intrinsic value, so it is prudent to run a sensitivity analysis with multiple discount rate scenarios before drawing conclusions.
How does terminal growth rate affect DCF intrinsic value calculations?
The terminal growth rate has an outsized effect because it drives the terminal value, which often accounts for 60–80% of the total DCF result. Even a 0.5% change in this assumption can move intrinsic value by 10–20%. The terminal growth rate should never exceed the long-run GDP growth rate of the economy — typically 2–3% for mature businesses. Using an overly optimistic terminal growth rate is one of the most common errors in amateur DCF models.
When is the DCF valuation method most and least reliable?
DCF works best for companies with predictable, positive free cash flows — such as utilities, consumer staples, or mature technology firms. It is less reliable for early-stage companies with negative or highly volatile cash flows, because small forecast errors compound dramatically over a multi-year projection. The model is also sensitive to macroeconomic assumptions like interest rates. Analysts typically pair DCF with comparable company multiples (EV/EBITDA, P/E) to cross-check the result.