Intrinsic Value / Share
-
Total Enterprise Value
-
Terminal Value (% of total)
-
When Should You Use This?
Use this calculator before buying any stock to estimate its fair value. Compare the intrinsic value to the current market price — if the intrinsic value is significantly higher, the stock may be undervalued. This is the same DCF approach used by Warren Buffett and institutional investors.
How It Works
1
Enter Cash Flow
Input the company's most recent annual free cash flow (FCF). You can find this on financial sites like Yahoo Finance under the cash flow statement.
2
Set Growth Assumptions
Enter your expected annual growth rate for the next 5-10 years, plus a terminal growth rate (usually 2-3%) for the period beyond.
3
Read Fair Value
Compare the calculated intrinsic value per share to the current stock price. A margin of safety of 20-30% below intrinsic value is recommended.
Frequently Asked Questions
Intrinsic value is the estimated true worth of a stock based on its future cash flows, discounted to present value. If a stock trades below its intrinsic value, it may be undervalued.
A common discount rate is 8-12%, representing your required rate of return. Higher risk companies warrant a higher discount rate. Many investors use the weighted average cost of capital (WACC).
The terminal growth rate is the expected perpetual growth rate after your projection period. It's typically 2-3%, roughly matching long-term GDP or inflation growth.
DCF is highly sensitive to assumptions. Small changes in growth or discount rates can dramatically change the result. Use it as one tool among many, and always apply a margin of safety.
Benjamin Graham and Warren Buffett recommend buying at 20-50% below intrinsic value. This margin protects against errors in your assumptions and unexpected events.