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Glossary · Valuation

Discounted cash flow

Valuing a business by adding up the cash it should produce in future, shrunk back to today’s dollars.

Why it matters

A dollar in ten years is worth less than a dollar today, because today’s dollar can be invested. A DCF puts every future year on the same footing.

How to read it

The answer is very sensitive to growth and discount rate assumptions. That is why we show three cases.

Also called: DCF

Related

Fair valueOur estimate of what one share is worth, based on the cash the business can produce.Discount rateThe yearly return an investor demands for the risk of owning a business.

In the Cluenex app, this explanation opens next to every discounted cash flow figure, with the live reading for the stock you are looking at. Open it in Cluenex