DCF Valuation

Stage 1

Data gathering

Historical analysis

Gather 5-10y historical financials. Analyze margins and growth trends.

Revenue projections

Forecast revenue based on TAM, market share, and pricing power.

Stage 2

Modeling

Operating model

Project revenue, opex, margins, and working capital requirements.

Free cash flow & WACC

Calculate UFCF and discount rate (WACC) using CAPM.

Terminal value

Calculate terminal value via perpetuity growth or exit multiple.

Stage 3

Conclusion

Sensitivity analysis

Stress-test key assumptions (WACC, terminal growth) to get value range.

Investment conclusion

Compare intrinsic value to market price. Determine margin of safety.

Template info

Step-by-step workflow for building a rigorous discounted cash flow (DCF) model to determine intrinsic value of an equity investment.

Neutral

Type:Valuation

Category:DCF Modeling

Asset class:Equity

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