DCF Intrinsic Value Calculator
Estimate the intrinsic value of any stock using a two-stage Discounted Cash Flow model. Input your growth assumptions, see projected cash flows, and understand your margin of safety.
Base Earnings
Growth Rates
Discount Rate
Discount Rate Guide:
Blue-chip Indian large-caps: 10–12%
Mid-caps or moderate risk: 12–14%
Small-caps or high risk: 14–18%
US large-caps (S&P 500): 8–10%
Intrinsic Value (DCF)
₹2,438.3
Significantly UndervaluedCurrent Price
₹1,500
Margin of Safety
+38.5%
Value Breakdown
Terminal Value = 56% of total intrinsic value
✓ Reasonable terminal value dependence. Near-term growth drives most of the value.
DCF valuation is highly sensitive to growth and discount rate assumptions. Use this as one input in your analysis, not as a definitive answer. Always combine with sector comparisons and qualitative moat analysis.
Future cash flows discounted back to today's value. The gap widens because money in the future is worth less today.
How intrinsic value changes with different growth rate (Y1–5) and discount rate assumptions. Green = price is below intrinsic value (undervalued). Red = price is above intrinsic value (overvalued).
| Discount ↓ / Growth → | 10.0% | 12.5% | 15.0% | 17.5% | 20.0% |
|---|---|---|---|---|---|
| 10.0% | ₹2,733.33 +45% | ₹3,034.06 +51% | ₹3,361.66 +55% | ₹3,717.9 +60% | ₹4,104.67 +63% |
| 11.0% | ₹2,308.93 +35% | ₹2,559.63 +41% | ₹2,832.56 +47% | ₹3,129.21 +52% | ₹3,451.11 +57% |
| 12.0% | ₹1,992.51 +25% | ₹2,206.01 +32% | ₹2,438.3 +38% | ₹2,690.64 +44% | ₹2,964.33 +49% |
| 13.0% | ₹1,747.96 +14% | ₹1,932.78 +22% | ₹2,133.76 +30% | ₹2,351.97 +36% | ₹2,588.52 +42% |
| 14.0% | ₹1,553.61 +3% | ₹1,715.71 +13% | ₹1,891.89 +21% | ₹2,083.06 +28% | ₹2,290.2 +35% |
Numbers show intrinsic value / margin of safety. Your base case is highlighted in the center column, middle row. A range of green cells indicates a more robust valuation margin; sparse green indicates higher sensitivity to assumptions.
What Is DCF Analysis?
Discounted Cash Flow (DCF) analysis is the most fundamental method of stock valuation. It estimates a company's intrinsic value by projecting future earnings or cash flows and discounting them back to their present value. The concept is simple: money today is worth more than money in the future, because today's money can be invested to earn returns.
How This Two-Stage DCF Model Works
This calculator uses a two-stage DCF model — the most commonly used approach for mature businesses with predictable but changing growth rates:
- Phase 1 (Years 1–5): Higher growth phase. Use your most confident growth estimate for the near term, based on recent earnings trends and analyst estimates.
- Phase 2 (Years 6–10): Transition phase. Growth typically slows as companies mature. Should be lower than Phase 1.
- Terminal Value: The value of all cash flows beyond Year 10, calculated using the Gordon Growth Model. Terminal growth rate should not exceed long-term GDP growth (3–5%).
Understanding the Discount Rate (WACC)
The discount rate is your required rate of return — what you need to earn to justify the investment risk. For Indian large-cap stocks, 10–12% is typical. Use higher rates for riskier small-caps or emerging businesses. The discount rate has an enormous impact on intrinsic value — even 1% difference can change the result by 15–20%.
What Is Margin of Safety?
Margin of Safety (popularized by Benjamin Graham) is the percentage discount between the current market price and the calculated intrinsic value. A positive margin of safety means the stock is trading below intrinsic value — you have a buffer against errors in your assumptions. Warren Buffett typically requires a 20–30% margin of safety before investing. A negative margin of safety means the stock is trading above calculated intrinsic value.
How to Use the Sensitivity Table
The sensitivity table shows how intrinsic value changes as you vary the Phase 1 growth rate and discount rate. This is crucial because no single DCF assumption is certain. If the stock appears undervalued across most cells in the sensitivity table (most cells are green), your thesis is more robust. If only a narrow set of assumptions produces undervaluation, the investment requires more precision — and therefore carries higher risk.
DCF Limitations — What It Cannot Tell You
DCF is a powerful tool but has real limitations:
- Garbage In, Garbage Out: The quality of the output depends entirely on your growth rate assumptions. Overly optimistic growth projections produce falsely high intrinsic values.
- Terminal value dominance: In most DCF models, 60–80% of the total value comes from the terminal value. Small changes in terminal growth rate have disproportionate impact.
- Doesn't capture qualitative factors: Management quality, competitive moat strength, and industry dynamics matter enormously but are not captured in the numbers. See our Economic Moats guide for the qualitative side of analysis.
Next Steps After Using This Tool
- Read our Valuation 101 guide for a complete framework that combines DCF with relative valuation (P/E, PEG, P/B).
- Use the P/E Ratio guide to cross-check your DCF result against market multiples.
- Identify the company's competitive moat using our Moat Analysis Framework before finalizing your growth assumptions.