ruly Simple DCF calculator
A DCF (discounted cash flow) brings the cash a company could generate back to today’s value. This simple two-stage model starts from the free cash flow per share of the last fiscal year.
The formula
Each year of the first stage, the cash flow grows at the chosen rate, then it is discounted: cash flow of year n / (1 + discount rate)ⁿ. Terminal value = last cash flow × (1 + long-term growth) / (discount rate − long-term growth), discounted like the last cash flow. Estimated value = sum of discounted cash flows + discounted terminal value.
How to read the result
The result is an estimate of a share’s value based on your assumptions, not a price target. The share of the terminal value tells you how much the result depends on distant years: above three quarters, most of it rests on the long-term growth and the discount rate.
Limits of the calculation
One point more or less on the discount rate or the long-term growth changes the result a lot. Try several sets of assumptions, cautious and optimistic, rather than settling on one. The model ignores net debt and cash, partly reflected already in the cash flow per share.
Glossary entries
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