Intrinsic Value Calculator
How to Use the Calculator
This calculator helps estimate the intrinsic value of a stock using the Discounted Cash Flow (DCF) method, a widely used financial valuation tool. Below is a detailed guide to each field and how to interpret the result:
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Free Cash Flow (FCF):
This is the cash a company generates after deducting operating expenses and capital expenditures. FCF is used to determine how much cash the company has available for growth, debt repayment, dividends, or reinvestment.
- Enter the latest FCF value as reported in the company’s financial statements.
- Select the appropriate unit:
- ₹: Input the value in Indian Rupees (e.g., ₹1,00,00,000 for ₹1 crore).
- ₹ Lakhs: Input the value in lakhs (e.g., "100" represents ₹1 crore).
- ₹ Cr: Input the value in crores directly (e.g., "1" represents ₹1 crore).
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Growth Rate (%):
This is the annual percentage growth rate you expect the Free Cash Flow to achieve over the projection period.
- For a stable company with predictable growth, use a lower rate (e.g., 2–5%).
- For a high-growth company, use a higher rate (e.g., 10–20%).
- If unsure, look at the company’s historical growth rate in Free Cash Flow as a reference.
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Discount Rate (%):
The discount rate reflects your required rate of return or the risk associated with the investment. It is used to calculate the present value of future cash flows.
- For low-risk, stable companies, use a lower discount rate (e.g., 8–10%).
- For higher-risk investments, use a higher rate (e.g., 12–15%).
- If you are unsure, the Weighted Average Cost of Capital (WACC) of the company is a good approximation for the discount rate.
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Number of Years:
The number of years over which you project the Free Cash Flow. This defines the time horizon of your valuation.
- For stable companies, use a longer projection period (e.g., 10 years).
- For uncertain or volatile companies, use a shorter period (e.g., 5 years).
- Ensure the time period reflects the company’s growth potential and industry dynamics.
- Click Calculate: Once all fields are filled, click the Calculate button to compute the intrinsic value.
Understanding the Result
The result represents the estimated Intrinsic Value of the stock, which is the present value of its future Free Cash Flows. Compare this value to the stock's current market price:
- If Intrinsic Value > Market Price: The stock might be undervalued, suggesting a potential buying opportunity.
- If Intrinsic Value < Market Price: The stock might be overvalued, indicating it could be overpriced.
Use this result alongside other financial and qualitative analyses to make informed investment decisions.
