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Glossary · Valuation

Discount rate

The yearly return an investor demands for the risk of owning a business.

Why it matters

A higher discount rate makes future cash worth less today. Riskier, more volatile businesses get higher rates.

How to read it

Small changes matter: moving from 8% to 9% can cut a growth company’s value by 15% or more.

Related

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

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