Question 1

What is DCF valuation?

Accepted Answer

DCF (Discounted Cash Flow) valuation is a method to estimate the intrinsic value of a stock by projecting future cash flows and discounting them back to present value using a required rate of return. It helps investors determine if a stock is undervalued or overvalued.

Question 2

How is intrinsic value calculated?

Accepted Answer

Intrinsic value is calculated by projecting a company's future cash flows based on assumptions about revenue growth, profit margins, and other metrics, then discounting those cash flows to present value. This calculator uses both equity methods (P/E, P/FCF) and enterprise methods (EV/EBITDA, EV/Sales).

Question 3

What are Bear, Base, and Bull scenarios?

Accepted Answer

Bear, Base, and Bull scenarios represent different assumptions about a company's future performance. Bear case uses conservative (pessimistic) assumptions, Base case uses balanced assumptions based on historical averages, and Bull case uses optimistic assumptions. This helps investors understand the range of possible valuations.

Question 4

What is the difference between Equity and Enterprise valuation?

Accepted Answer

Equity valuation methods (P/E, P/FCF) calculate the value of shareholders' equity directly. Enterprise valuation methods (EV/EBITDA, EV/Sales) calculate the total value of the business including debt, then subtract net debt to arrive at equity value. Both approaches should yield similar results when used correctly.