Intrinsic Value Calculator (DCF, DDM, Graham)
What a share may be worth three ways — and how far the price is from it.
Sensitivity
Cash flows
All three methods
Each method uses its own inputs above; they answer different questions, so expect them to differ.
How this was calculated
Results are estimates for general information and planning, not financial advice. Banks and institutions may calculate differently (rounding, fees, rate changes). Confirm figures with your lender or a qualified adviser before deciding.
About the Intrinsic Value Calculator (DCF, DDM, Graham)
A share’s intrinsic value is an estimate of what it is worth from the cash the business can produce for its owners, as opposed to its price today. This calculator estimates it three standard ways, each from inputs you choose. A two-stage discounted cash flow (DCF) grows today’s free cash flow through a fast and a slower stage, adds a terminal value and discounts everything at your required return — with a WACC helper that builds that rate from the CAPM cost of equity and the after-tax cost of debt. The Gordon dividend discount model values the dividends growing for ever. And Benjamin Graham’s two rules of thumb give the Graham number and his growth formula.
Each method shows the value per share, the margin of safety against the price you enter and a sensitivity table, because small changes to growth and discount rates move these values a lot. A side-by-side table compares the three. No market data is built in: every rate and figure is yours, and nothing you enter leaves your browser.
How to use it
- Choose the currency and enter today’s share price, for the margin of safety.
- Two-stage DCF: enter the latest year’s free cash flow, the growth rate and length of the first stage (and, if you like, a slower second stage), the discount rate, and either a terminal growth rate or an exit multiple. Add debt, cash and the number of shares, with the units they are in (for example ₹ crore and crore shares).
- No discount rate yet? Open the WACC helper, enter the risk-free rate, beta, equity risk premium, cost of debt, tax rate and the market values of equity and debt, then press Use the WACC as the discount rate.
- Dividend discount: enter last year’s (or next year’s) dividend per share, its growth for ever and your required return.
- Graham: enter EPS, book value per share, the growth you expect for the next 7 to 10 years and today’s AAA corporate bond yield.
- Read the value per share and margin of safety, check the sensitivity table and compare the methods. Copy the summary or download the DCF as CSV.
Examples
FCF ₹5,000 crore growing 12% a year for 5 years, then 8% for 5; discount rate 11%; terminal growth 5%; debt ₹20,000 crore, cash ₹8,000 crore; 100 crore shares; price ₹1,500
Enterprise value ₹1,29,582 crore · equity ₹1,17,582 crore · ₹1,175.82 a share · the price is 27.6% above the value
61.6% of the enterprise value is terminal value; with a 15× exit multiple instead the value is ₹1,061.83.
Risk-free 7%, beta 1.1, equity risk premium 6%; cost of debt 9%, tax 25%; equity 1,50,000, debt 20,000
Cost of equity 13.6% · after-tax cost of debt 6.75% · WACC 12.79%
Dividend just paid ₹25, growing 8% a year; required return 11%; price ₹1,500
D₁ = ₹27 · value ₹900 · the price implies a 9.8% return
EPS ₹60, book value ₹500 a share; expected growth 12%; AAA yield 7.5% (an example rate)
Graham number ₹821.58 · formula 60 × (8.5 + 24) × 4.4 ÷ 7.5 = ₹1,144
Common uses
- Estimate what a share may be worth before buying, and how much margin of safety the price leaves.
- Test how much a valuation depends on the growth and discount rates.
- Work out a discount rate with the WACC helper and use it in the DCF.
- Compare a company’s value by cash flows, dividends and earnings.
The formulas
- DCF: FCFₜ = FCFₜ₋₁ × (1 + g) through each stage; each year is discounted by (1 + r)ᵗ. Terminal value at year N: Gordon FCFₙ × (1 + g) ÷ (r − g), or an exit multiple × FCFₙ, discounted N years. Equity = enterprise value − debt + cash; value per share = equity ÷ shares.
- WACC = E ÷ (D + E) × Re + D ÷ (D + E) × Rd × (1 − t), with the cost of equity from the CAPM: Re = Rf + β × equity risk premium (Sharpe).
- Gordon growth model: V = D₁ ÷ (r − g), with D₁ = D₀ × (1 + g); it needs r > g.
- Graham number = √(22.5 × EPS × BVPS). 22.5 is 15 × 1.5: the defensive investor’s limits in The Intelligent Investor of a P/E of 15 and a price-to-book of 1.5.
- Graham formula V = EPS × (8.5 + 2g) × 4.4 ÷ Y: 8.5 is the P/E Graham gave a company with no growth, g the expected growth over 7 to 10 years in %, 4.4 the average AAA corporate bond yield when the first version (V = EPS × (8.5 + 2g)) was published, and Y today’s: his revision scales the first version by how far bond yields have moved since.
- Margin of safety = 1 − price ÷ value: a ₹1,000 value bought at ₹800 has a 20% margin.
The DCF and WACC follow Aswath Damodaran’s Investment Valuation.
Choosing the inputs
- Free cash flow: cash from operations minus capital spending (free cash flow to the firm, before interest, if you subtract debt afterwards as here). Use a normal year, not an unusually good or bad one.
- Growth: the first stage is the company’s own growth; the second lets it slow down towards the economy’s. The terminal growth applies for ever, so it should not exceed long-run nominal growth of the economy.
- Discount rate: the return investors require for the risk — the WACC for a DCF of free cash flow to the firm; the cost of equity for dividends.
- AAA yield: look up the current yield on AAA-rated corporate bonds in your market; the formula is sensitive to it.
- Units: enter cash flows, debt and cash in one unit and shares in another if you like (₹ crore and crore shares give ₹ a share directly).
Which method fits which company
- DCF suits companies with steady, positive free cash flow. It is the most complete method and the most sensitive to its assumptions: the terminal value often makes up half or more of the result.
- Dividend discount suits mature companies that pay out most of their earnings (utilities, some banks and consumer staples). For companies that pay little, it gives low values because the cash they keep is ignored.
- Graham’s formulas are quick screens from earnings and book value. The Graham number suits stable, asset-backed businesses; neither formula fits loss-making or very fast-growing companies.
When the three disagree widely, that is information too: the price depends on assumptions that the methods treat differently.
Limitations
- A valuation is only as good as its inputs: the calculator does the arithmetic, not the forecasting. Small changes in growth or the discount rate change the value a lot — see the sensitivity tables.
- The DCF grows one free-cash-flow figure at stage growth rates; for a year-by-year forecast (or negative cash flows) use the DCF in the WACC & valuation calculator. Cash flows are discounted from the end of each year.
- Debt and cash are book figures you enter; minority interests, preference shares and dilution from options are not modelled.
- This is an estimate for study and comparison, not advice to buy or sell.
Privacy
Everything is calculated in your browser. The figures you enter are never uploaded or stored on a server.
Frequently asked questions
What is the intrinsic value of a share?
An estimate of what one share is worth from the cash the business is expected to produce for its owners, discounted to today at a rate that reflects the risk. It is not a fact about the share but the result of your assumptions; the price is what the market pays today.
What is a margin of safety?
Benjamin Graham’s idea of buying only when the price is well below your estimate of value, so that errors in the estimate or bad luck still leave room. It is 1 − price ÷ value: a share you value at ₹1,000 offered at ₹700 has a 30% margin of safety.
Why are the three values so different?
They use different information. The DCF uses free cash flow and your growth and discount rates; the dividend model only the dividends; Graham’s formulas earnings, book value and growth with fixed multipliers. A company that pays small dividends but generates a lot of cash looks cheap by DCF and expensive by the dividend model.
What discount rate should I use in a DCF?
The return investors require for the risk of the business. For free cash flow to the firm that is usually the weighted average cost of capital (WACC): the cost of equity from CAPM and the after-tax cost of debt, weighted by market values. The WACC helper works it out from your inputs.
What is the Graham number?
The highest price a defensive investor following Graham’s rules would pay: √(22.5 × EPS × book value per share). It combines his limits of 15 times earnings and 1.5 times book value. EPS ₹60 and book value ₹500 give ₹821.58.
Why does the terminal value matter so much?
Because it stands for all the years after the forecast, which usually hold most of a growing company’s value. With 5% growth for ever at an 11% discount rate, the terminal value is 61.6% of the example’s enterprise value. One point more on the discount rate cuts the value from ₹1,175.82 to ₹979.76 a share; one point less raises it to ₹1,451.24 — the sensitivity table shows the whole range.