Free DCF Calculator: Institutional-Grade Intrinsic Value Analysis

#Why Most DCF Calculators Are Wrong

Every finance textbook teaches discounted cash flow analysis. But most online DCF calculators make a critical error that can lead to wildly inflated fair values: they assume growth is free.

The standard formula most tools use:

Terminal Value = FCF / (WACC - g)

This formula implicitly assumes a company can grow its free cash flow at rate g forever without reinvesting a single dollar. That is economically impossible. Growth requires investment — in factories, R&D, working capital, and talent. The correct terminal value formula, as taught by Michael Mauboussin at Columbia and Aswath Damodaran at NYU Stern, accounts for this reinvestment:

Terminal Value = NOPAT x (1 - g/ROIC) / (WACC - g)

The term (1 - g/ROIC) is the reinvestment rate — the fraction of after-tax operating profit that must be plowed back into the business to fund growth. When ROIC equals WACC, growth creates zero value. When ROIC exceeds WACC, growth creates value. When ROIC is below WACC, growth destroys shareholder value.

This single insight — that the value of growth depends entirely on the spread between ROIC and WACC — is the foundation of our calculator.

Try the DCF Calculator →

#How Our DCF Calculator Works

Auto-Populated Financial Data

Enter any ticker and our calculator automatically fetches:

Every input is editable. The auto-populated values provide a starting point — you adjust the assumptions.

ROIC-Based Valuation Engine

At the core of our calculator is a return on invested capital (ROIC) framework. Instead of simply compounding free cash flow, we:

1. 1Compute NOPAT — Net Operating Profit After Tax = EBIT x (1 - effective tax rate)
2. 2Compute Invested Capital — Equity + Debt - Cash (the capital deployed in the business)
3. 3Compute ROIC — NOPAT / Invested Capital (the efficiency of capital deployment)
4. 4Derive Reinvestment Rate — Growth Rate / ROIC (what fraction of profits must be reinvested)
5. 5Project Free Cash Flow — NOPAT minus reinvestment each year

This approach correctly links growth to the capital required to achieve it. A company growing at 15% with ROIC of 30% reinvests 50% of NOPAT. A company growing at 15% with ROIC of 15% reinvests 100% — leaving zero free cash flow despite impressive growth.

WACC: Built From First Principles

Our weighted average cost of capital is computed using Damodaran's methodology, not a single input box:

The synthetic credit rating uses Damodaran's interest coverage ratio table — not the crude EBITDA/Debt ratio many tools default to. This produces more accurate cost-of-debt estimates, especially for companies with volatile earnings.

Competitive Advantage Period (CAP) Fade

No company maintains above-average returns forever. Competition, disruption, and mean reversion erode advantages over time. Our calculator models this using exponential ROIC fade:

• Companies with ROIC above 40% use an 8-year half-life
• Companies with ROIC between 25-40% use a 6-year half-life
• Companies with ROIC below 25% use a 4-year half-life

By year 10, the projected ROIC converges toward a terminal ROIC slightly above WACC (reflecting residual competitive advantages for quality companies). This prevents the common error of assuming today's exceptional returns persist indefinitely.

Revenue-Based Model for Negative-FCF Companies

Traditional DCF breaks down when free cash flow is negative — you cannot discount negative numbers and get a meaningful fair value. Our calculator automatically detects this and switches to Damodaran's revenue-based approach:

1. 1Project revenue at the current growth rate, decaying toward a terminal rate
2. 2Linearly converge operating margins from current levels to the sector median over 10 years
3. 3Compute NOPAT from projected revenue and margins
4. 4Derive reinvestment as change in revenue divided by the sales-to-capital ratio
5. 5FCF = NOPAT minus reinvestment (negative in early years, positive as margins expand)
6. 6Discount all cash flows at WACC

This approach works for high-growth companies like early-stage SaaS, biotech, and pre-profit tech platforms where traditional FCF-based DCF produces nonsensical results.

#Institutional Risk Analytics

Our calculator goes beyond fair value with a suite of risk checks used by institutional investors:

Altman Z-Score

The classic financial distress indicator, computed automatically:

Formula: Z = 1.2(WC/TA) + 1.4(RE/TA) + 3.3(EBIT/TA) + 0.6(MC/TL) + 1.0(Rev/TA)

Accruals Quality (AQR-Style)

Earnings quality matters. Our calculator computes the accrual ratio — the gap between reported net income and operating cash flow:

This metric is based on the research behind AQR Capital's quality factor, which has documented that companies with cash-backed earnings outperform those relying on accounting accruals.

Correlated Scenario Analysis

Single-point fair value estimates create false precision. Our calculator runs four probability-weighted scenarios with correlated macro assumptions:

Unlike simple sensitivity tables that vary one input at a time, our scenarios correctly correlate growth, margins, and credit spreads — because in real recessions, all three deteriorate simultaneously.

Base Rate Analysis (Mauboussin)

Before trusting any growth projection, check the base rates. Our calculator automatically computes the probability of sustaining the projected growth rate based on historical data for all U.S. companies:

• What percentage of companies grew revenue above 20% for 5+ consecutive years?
• How does the projected growth compare to the company's own historical trajectory?
• Is the implied growth rate in the top 10% of all companies — and if so, is that realistic?

This anchors your assumptions in empirical reality rather than optimistic narratives.

Equity Duration

Inspired by AQR Capital's research on interest rate sensitivity, our calculator computes the Macaulay duration of the stock's projected cash flows:

• Short duration (below 15 years) — More near-term cash flows, less rate-sensitive
• Long duration (above 25 years) — Most value from distant cash flows, highly rate-sensitive

This helps explain why high-growth tech stocks collapse when interest rates rise — their cash flows are concentrated far in the future, making them the equity equivalent of 30-year bonds.

Normalized Cycle Position

Our calculator flags when a company's current operating margin is more than 25% above or below its 3-year quarterly average. This catches companies at peak or trough earnings:

• Peak margins — Fair value may be inflated if using current earnings as the base
• Trough margins — Fair value may be depressed, creating potential opportunity

Cross-Sectional Valuation Percentile

Where does this stock sit relative to the entire market? Our calculator ranks the company's P/E, P/S, and EV/EBITDA ratios against our full 7,333+ stock universe and displays a composite percentile:

• P90+ — Among the most expensive 10% of stocks
• P40-P60 — Near median valuation
• P10 or below — Among the cheapest 10%

#Value Decomposition

One of the most powerful features is our value decomposition, which breaks enterprise value into two components:

1. 1Steady-State Value = NOPAT / WACC — The value of the company if it never grew again
2. 2Present Value of Growth Opportunities (PVGO) = Enterprise Value minus Steady-State Value

This tells you exactly how much you are paying for future growth. For a company where 70% of the enterprise value is PVGO, you are making a massive bet on growth materializing. For a company where 80% is steady-state, the market is pricing in almost no growth — a potential value opportunity.

#How to Use the Calculator: A Step-by-Step Guide

Step 1: Enter a Ticker

Type any U.S. stock ticker. Financial data auto-populates within seconds.

Step 2: Review Auto-Populated Assumptions

Check the growth rates, WACC components, and terminal assumptions. The calculator provides Damodaran-style estimates with explanations for each value.

Step 3: Adjust What You Disagree With

Every input is editable. If you believe the company will grow faster than the auto-populated estimate, increase it. If you think margins will expand, adjust accordingly. The ROIC dashboard shows you the impact in real time.

Step 4: Read the ROIC Dashboard

Before looking at fair value, check: - Is ROIC above WACC? If not, growth is destroying value. - What is the reinvestment rate? Higher reinvestment means less free cash flow. - How does ROIC compare historically? Is it sustainable?

Step 5: Check the Risk Metrics

Review the Altman Z-Score, accruals quality, cycle position, and valuation percentile. These provide context that pure DCF analysis misses.

Step 6: Review Scenario Analysis

Look at the probability-weighted fair value across bull, base, and recession scenarios. The expected fair value across scenarios is more robust than any single-point estimate.

Step 7: Interpret the Result

The fair value is an estimate based on your assumptions, not a price target. Compare it to the current stock price:

#Academic Foundations

Our DCF calculator is built on peer-reviewed research from the world's leading finance scholars:

#Frequently Asked Questions

Is this really free?

Yes. The DCF calculator is completely free with no login required. We believe institutional-quality tools should be accessible to every investor.

How often is the financial data updated?

Financial data is refreshed weekly from our Snowflake data warehouse, which ingests from Intrinio's standardized financial statements. Price data and market cap are updated daily.

Can I use this for non-U.S. stocks?

Currently, our calculator supports U.S.-listed stocks only. We plan to expand to international markets in the future.

What makes this different from other free DCF calculators?

Three things: (1) The reinvestment-rate terminal value formula that properly accounts for the cost of growth, (2) the ROIC dashboard that tells you whether growth creates or destroys value, and (3) the institutional risk analytics (Z-Score, scenarios, duration, accruals) that no other free tool includes.

Should I use this as a price target?

No. A DCF model produces an estimate of intrinsic value based on assumptions. The output is only as good as the inputs. Use it as one tool among many — alongside our factor rankings, stock screener, and qualitative analysis.

#Start Analyzing

Our DCF calculator is ready to use right now. Enter any U.S. stock ticker and get institutional-grade intrinsic value analysis in seconds.

Launch the DCF Calculator →

View Stock Rankings →

Learn: What Is Free Cash Flow? →