Intrinsic Value (DCF) Calculator

A discounted cash flow (DCF) values a share as the present value of everything it will pay its owner. The calculator splits the future in two. In stage 1, earnings grow at your chosen rate for a set number of years. After that, in stage 2, growth settles to a modest steady rate forever, and the whole of that distant future is collapsed into one terminal value. Every amount is then discounted back to today at your required return.

The terminal value is the Gordon growth formula: a stream that starts at E_N × (1 + g_T) and grows at g_T forever is worth that first payment divided by (r − g_T). The calculator discounts at the end of each year and treats the starting figure as year 0.

Take a company earning Rs 40.00 per share, growing 12% a year for 10 years, then 5% forever, discounted at 20%. Stage 1 earnings add up to a present value of Rs 279.10. The terminal value is Rs 869.64 at the end of year 10, worth Rs 140.45 today. Intrinsic value is Rs 419.55 per share, and 33% of it comes from the terminal value.

Two points of discount rate move the answer by roughly 16% each way. The no-growth row is a useful floor: it is simply earnings divided by the discount rate (Rs 40.00 ÷ 20%). Anything above it is what you are paying for growth.

Your discount rate is the return you could expect elsewhere for similar risk, so it starts from the risk-free rate. The 10-year PIB cut-off yield was 12.85% at the State Bank's October 7, 2026 auction, and the policy rate is 12%. Adding an equity risk premium of roughly 6 to 8 points, a rule of thumb rather than a published statistic, gives about 19% to 21%, so the calculator starts at 20%. When yields fall, your required return should fall with them and values rise.

Terminal growth is the hardest input to defend, so keep it low. The default is 5%, the low end of the 5% to 7% medium-term inflation range the State Bank targets, which assumes earnings at best keep pace with prices in the very long run. It must stay below the discount rate, and it should never exceed the long-run growth of the economy. Both rates are nominal rupee rates, so use a consistent view of inflation in your growth estimate.

• Earnings are not cash. EPS ignores the money a company must reinvest in plant, working capital and debt repayment. Companies stuck with large receivables, such as some power producers, can report profit without receiving the cash. Use free cash flow where you can.
• One growth rate for the whole of stage 1. Real growth is lumpy and usually fades. A single rate smooths over cycles in oil prices, cement margins or fertiliser offtake, so start from normal, not peak, earnings.
• The terminal value dominates. A big share of the answer rests on one assumption about the far future. Always read the sensitivity table.
• One-off items in EPS. Revaluation gains, tax settlements or impairments distort the starting figure. Check the results announcement before trusting a jump.
• Policy and currency risk. Windfall levies, tariff changes, gas price decisions and rupee moves can change a sector's economics overnight. They sit inside your discount rate and growth guess, not in the formula.
• Share count changes. Bonus shares and rights issues change EPS per share. Make sure the starting EPS is on the same share count as the price you compare with.

Treat intrinsic value as a range, not a number: run a cautious, a middle and an optimistic case and see how often the market price sits below them. Then cross-check with simpler yardsticks: the Graham number, the P/E ratio calculator and, for steady payers, the dividend discount model. If several methods agree the stock is cheap, the case is stronger than any one of them alone. To see which of two peers looks cheaper before you start, put them side by side in the stock comparison. For a company's latest results and history, open its page, for example OGDC.