Intrinsic value calculator (DCF)

1. A fresh starting point: Revenue, earnings and free cash flow over the Trailing 12 months (sum of the last four quarters from SEC filings; for foreign companies the SEC updates late, from the company’s own latest reports), plus cash and debt from the latest balance sheet.
2. Revenue growth: Years 1 and 2 use the growth you enter (default: 75% average analyst forecast + 25% past trend). After that, the gap to “long-term growth” closes by 25% a year, because no company grows fast forever.
3. Margins: move in a straight line from today’s margin to the target margin by year 5. For cyclical companies the target sits near the cycle average, not the peak.
4. Three valuation methods: (1) final-year EPS × P/E at exit, (2) free cash flow per share × P/FCF at exit — both discounted to today, plus the dividends you collect along the way; (3) classic DCF: free cash flow for every year + a terminal value with “perpetual growth”, all discounted. Fair value is the average of the methods.
5. Exit multiples: half from long-term growth and business quality (ROIC), half from the median forward P/E of industry peers, not one fixed number for everyone.
6. Required return: 9% (roughly what the whole US stock market is priced to return: the 10-year Treasury yield + the equity risk premium), plus country risk for businesses in emerging markets (Damodaran’s method).
7. Shares outstanding: follows the median annual change of the last 5 years (negative = buybacks).

Banks and insurers: are valued only with P/E and earnings growth. Real estate trusts (REITs): use operating cash flow.

Reverse DCF: we start from today’s price, work out the growth the market assumes for years 1 and 2, and compare it with analyst forecasts.

Return if you buy today: your annual return if you buy today, collect dividends and sell in the final year at the exit multiples.