Stock Fair Value Calculator (DCF)
FAQ
Most frequent questions and answers
Fair value is the intrinsic value of a stock, representing what it’s actually worth based on its financials, growth potential, and market conditions, rather than just its current market price. It helps investors determine whether a stock is undervalued, overvalued, or fairly priced.
The growth rate is the expected growth rate of the company. You can find it from the historical data.
(Suggested rate 10-15%)
The discount rate is the expected discount rate of the company. Which you expect to project. You can assume it as your “Expected annualized return from the Stock”
(Ideal rate 15-25%)
Free cash flow is the cash generated for operational activities, excluding capital expenditure. You can find this in the “Cash flow statement” of the company.
Present calculations often differ from the future. To overcome this having a margin of safety to value a stock gives a buffer to increase your odds of picking at the right price.
(Ideal rate 30-50%)
This calculator estimates a stock’s fair value using a Discounted Cash Flow (DCF) model. The most accurate but complex method. It projects the company’s free cash flow for 10 years at a user-defined growth rate, discounts these future cash flows to their present value using a specified discount rate, and adds a terminal value representing cash flows beyond the 10-year period.
The intrinsic value is divided by the total outstanding shares to derive a fair value per share. A margin of safety is applied to account for uncertainties, providing an adjusted fair value. The result compares this adjusted value to the current market price to evaluate overvaluation or undervaluation.
This tool provides an illustrative estimate based on assumptions about growth rates, discount rates, and future cash flows.
These inputs are subjective and may not reflect actual outcomes, as market conditions, company performance, and macroeconomic factors can change unpredictably as past performance and model outputs do not guarantee future results.
NO! The results are not financial advice, guarantees, or recommendations to buy/sell securities.
Users should update inputs regularly with the latest financial data and consult a qualified financial advisor before making investment decisions.
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Are you navigating the Colombo Stock Exchange (CSE) and wondering if a stock is truly worth its price? Making informed investment decisions in the Sri Lankan stock market requires understanding a stock’s fair value.
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