Calculate true stock value using Discounted Cash Flow (DCF) analysis
Be conservative: 10-15% is realistic for quality companies
Long-term growth, typically 3-5% (GDP growth rate)
Your required rate of return: 10-15% is typical
Current Market Price
₹1000
Intrinsic Value (DCF)
₹1012.67
Margin of Safety
+1.27%
Hold - Fairly valued
✓ Stock offers reasonable margin of safety (1.27%)
Note: DCF is sensitive to assumptions. Consider running scenarios with different growth and discount rates.
Model Assumptions:
• 15% annual EPS growth for next 5 years
• 4% perpetual growth thereafter
• 12% discount rate (required return)
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The Intrinsic Value Calculator uses Discounted Cash Flow (DCF) analysis to estimate a stock's true worth based on future earnings potential. Unlike market price which fluctuates daily, intrinsic value represents the present value of all future earnings discounted to today. This calculator helps value investors identify undervalued stocks by comparing intrinsic value to market price. A stock trading below intrinsic value offers a 'margin of safety' as advocated by Benjamin Graham and Warren Buffett.
Use your required rate of return. Conservative investors use 12-15%. It should be higher than risk-free rate (10-year G-Sec ~7%) plus equity risk premium (5-8%). Higher discount rates give lower intrinsic values (more conservative valuation).
DCF is only as good as your assumptions. Small changes in growth rate or discount rate significantly impact intrinsic value. Use DCF as a guide, not absolute truth. Always perform sensitivity analysis with different growth and discount rates.
Benjamin Graham recommended 30-50% margin of safety for common stocks. Practically, 20-30% provides good downside protection. This means only buy when stock trades at 70-80% or less of intrinsic value. Be more conservative with cyclical or risky businesses.
Free Cash Flow (FCF) is more accurate as earnings can be manipulated through accounting. However, EPS is simpler and works well for companies with consistent cash generation matching earnings. For capital-intensive businesses, always use FCF instead of EPS.
Use: (1) Historical EPS growth (last 5-10 years), (2) Analyst consensus estimates, (3) Industry growth trends, (4) Management guidance. Be conservative - using 20%+ growth for 10 years is unrealistic for most companies. High-quality companies sustain 12-15% growth.