DCF Analysis Explained: Intrinsic Value from First Principles
A plain-English guide to discounted cash flow (DCF) analysis — how to estimate a stock’s intrinsic value from future cash flows, the discount rate (WACC), terminal value, and enterprise vs. equity value.
The big idea: a dollar later is worth less than a dollar now
The four steps of a DCF
Step 1: Project free cash flow
Step 2: Choose a discount rate (WACC)
Step 3: Terminal value
Step 4: From enterprise value to a price per share
The reverse DCF: let the market tell you its assumptions
Common DCF pitfalls
Common questions about DCF analysis
Try it on a stock: Apple Inc. (AAPL) · MICROSOFT CORP (MSFT) · Alphabet Inc. (GOOGL) · NVIDIA CORP (NVDA) · AMAZON COM INC (AMZN) · Tesla, Inc. (TSLA) · Meta Platforms, Inc. (META)