Value per share
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Calculator
DCF fair value calculator
A two-stage discounted cash flow model: five years of free cash flow growing at your rate, then a terminal value, all discounted back and divided by the share count. Every year is printed in the working.
Enterprise value
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Terminal share of value
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The working
How the model works
Free cash flow grows at your rate for five years. Each year's cash is divided by (1 + discount rate) raised to the number of years away it is. After year five, a terminal value stands in for everything that follows: year-five cash flow grown once more, divided by the discount rate minus the terminal growth rate. Add the discounted years and the discounted terminal value and you have enterprise value. Subtract net debt for equity value, then divide by shares.
The full method, with a sensitivity table, is in how to estimate a stock's fair value with a simple DCF. Where the starting cash flow comes from is covered on the free cash flow page.
Reading the result
Watch the terminal share. When it is above two thirds, most of the value you just calculated comes from years nobody can forecast. Then nudge the discount rate by one point either way. The spread between those answers is a fairer summary of what the model knows than the single figure at the top.
A published fair value estimate is this same arithmetic done by someone else, with their assumptions. Read the assumptions before the number.
Related questions
What discount rate should I use?
The discount rate is the return you require for the risk of owning the stock. Analysts often build it from a cost of capital, but for your own use a simple approach is a rate you would need to beat to prefer this stock over an index fund. Run the model at two or three rates and see how far the value moves.
Why does the terminal value dominate the answer?
Because it stands for every year after the forecast period, and those years are many. In most DCF models the terminal value is the larger part of the total. That is also why small changes to the terminal growth rate or the discount rate move the result so much.