Value Investing Intrinsic Value (DCF) Calculator

Calculate the intrinsic (fair) value of a stock using the Discounted Cash Flow method. See if a stock is undervalued.

Trailing 12-month earnings per share

Projected annual earnings growth (next 5-10 years)

Years of above-average growth

Long-term sustainable growth (typically 2-4%)

Required return (usually 8-12%)

For per-share calculations

Future EPS = Current EPS × (1 + Growth Rate)^Years\nPresent Value = Future EPS / (1 + Discount Rate)^Years\nTerminal Value = Terminal EPS × (1 + g) / (r - g)\nIntrinsic Value = Sum of PVs + PV of Terminal Value\n\nWhere r = discount rate, g = terminal growth rate
EPS: $5 | Growth: 12% for 10 years\nTerminal: 3% | Discount: 10%\n\nYear 10 EPS = $15.52\nTerminal Value (P/E 16x) = $248\nPV of Terminal = $95.8M\nTotal PV = $120M\nPer Share = $120 (if 100M shares)

What is intrinsic value in value investing?

Intrinsic value is the "true" worth of a company based on fundamentals (earnings, cash flow, growth), not market price. Warren Buffett defines it as the present value of all future cash flows. If intrinsic value > market price = potentially undervalued = buy. If intrinsic value < market price = potentially overvalued = sell or avoid.

How does the DCF method work?

Discounted Cash Flow (DCF) calculates: (1) Project future earnings for growth period, (2) Estimate terminal value (what company is worth after growth period), (3) Discount everything back to today using discount rate, (4) Sum = intrinsic value. It's the fundamental method used by Warren Buffett and value investors.

What discount rate should I use?

Discount rate = your required return (also called "hurdle rate"). Typically 8-12% for stocks. Lower for stable companies (8%), higher for risky ones (12%+). Warren Buffett uses the 10-year Treasury rate + risk premium. The higher the discount rate, the lower the intrinsic value - you demand more return for risk.

What is terminal growth rate?

Terminal growth is the sustainable long-term growth rate after the high-growth period. Usually 2-4% - roughly nominal GDP growth. Using >5% terminal growth is unrealistic because no company can grow faster than the economy forever. Very safe companies get 2-3%, riskier get 3-4%.

How do I estimate growth rate?

Look at: (1) Historical earnings growth (10+ years), (2) Analyst estimates (next 5 years), (3) Company-specific factors (new products, market share). Conservative: use historical average. Aggressive: use analyst consensus. Never assume >20% growth for >10 years - even great companies slow down.

What is the margin of safety?

Margin of safety = (Intrinsic Value - Market Price) / Intrinsic Value. Value investors only buy when this is 25-50%. If intrinsic is $100 and stock trades at $70, margin is 30%. This protects against errors in your assumptions. Benjamin Graham recommended at least 25% margin.

How accurate is DCF valuation?

DCF is only as accurate as your inputs. Small changes in discount rate or growth rate dramatically affect results. Use ranges: optimistic, base, pessimistic scenarios. If DCF shows $100 intrinsic value, check if your assumptions are reasonable. It's a tool for thinking, not precise prediction.

Why use EPS instead of cash flow?

This simplified DCF uses EPS (easier to find and understand). Professional DCF uses Free Cash Flow (FCF), which is harder to calculate but more accurate. The principle is the same: discount future earnings/cash back to today. For quick estimates, EPS works. For precision, use FCF.