Valuation tool, comparison mode
Reverse DCF: side by side
Enter two companies in the same sector. See what growth rate each price is already implying, and which one asks you to believe less.
Shared settings. These apply to both companies.
Current T-bill or government bond rate
Extra return for owning stocks
Keep the same for a fair sector comparison
Required return = 11.0% + 1.0 × 6.0%
= 17.0%
Projection period
Enter both companies
Company A
Company B
What each price is already implying
Company A, implied growth
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annual FCF growth baked in
Enter numbers above to see the result.
Company B, implied growth
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annual FCF growth baked in
Enter numbers above to see the result.
Comparison verdict
Enter both companies to see the comparison.
Sensitivity. Upside at different growth rates.
Both companies are plotted on the same axis. Above zero means undervalued at that growth assumption. Where the lines diverge shows which company gives more room to be wrong.
Your estimate. Set independently for each company.
Company A
Your expected FCF growth for Company A
Forever growth after year 5. 3 to 4% is typical.
Company B
Your expected FCF growth for Company B
Forever growth after year 5. 3 to 4% is typical.
At your growth estimate. Fair value per share.
Company A, fair value
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fair value per share
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Company B, fair value
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fair value per share
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Fair value comparison
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How to use this
01
Use it for same-sector comparisons only. Pharma versus pharma. Cement versus cement. Keep beta the same for both. The shared CAPM is what makes the comparison fair.
02
The company with the lower implied growth sets a lower bar. If you believe both businesses can grow at a similar rate, the lower-implied one offers more margin of safety.
03
Tip checker. Got a target price for one company? Enter that target instead of the current price. The tool tells you what growth rate would need to happen for that tip to be correct.
Educational tool only. Not a buy or sell recommendation. Inputs are user-supplied. Verify them against audited financials. A three-year average EPS works best. Do not use this for banks, insurance, or companies with significant non-cash EPS items.