Using a Discounted Cash Flow Calculator for
Stock Valuation
Discounted Cash Flow (DCF) is one of the primary tools used in stock research. Discounted cash flow valuation attempts to arrive at the value of a company or stock today, based on future earnings projections.
The Stock Research Pro DCF calculator calculator leverages Free Cash Flow (FCF) for valuation. FCF is a measure of how much cash the business has generated after allowing for capital expenses (buildings, equipment, etc.). FCF can be used for expansion, to pay dividends, to reduce debt, or other business purposes.
The Importance of Free Cash Flow
If a company cannot generate significant free cash flow, its growth is hindered, it has a harder time borrowing, and its stock price will suffer. For this reason, a company’s free cash flow should be examined closely by investors.
Calculating for Net Present Value
The calculation automates the arithmetic method of DCF analysis by bringing all cash flows to their net present value and giving you an intrinsic value of the stock based on your growth rate assumptions. The calculator then compares the current stock price against its intrinsic value to present you with a “margin of safety”, that is, the level of discount (if any) that you can currently purchase the stock.
The Stock Research Pro Valuation Software for DCF Stock Valuation Analysis
The SRP Valuation software offers three modules to assess the value of a stock and the health of a company:
• Discounted Cash Flow (DCF)
• Net Current Asset Value per Share (NCAVPS)
• Dividend Discount Model (DDM)
Each module includes a video tutorial to guide you through the process. Click here to watch the discounted cash flow tutorial.
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The above information and the associated calculator are educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.
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