Value = Sum of [ FCF_t / (1 + r)^t ] for t = 1..N + Terminal Value / (1 + r)^N
A dollar earned years from now is worth less today — DCF discounts each future cash flow back to the present.
▶ Watch: Discounted Cash Flow explained in 24 seconds
What it is
A DCF estimates what a company is worth by forecasting the cash it will generate in future years and then converting each year's cash to its present value using a discount rate. The core idea is that a dollar received in the future is worth less than a dollar today. The sum of all discounted future cash flows is the estimated value.
Why it matters
DCF is the most direct way to estimate intrinsic value because it ties value to the actual cash a business produces rather than to market sentiment or comparable-company multiples. Its weakness is sensitivity: small changes in the growth rate or discount rate produce large swings in the answer, so the output is only as good as the inputs.
How it's calculated
Project free cash flow for a forecast period (often 5-10 years), discount each year by dividing by (1 + discount rate) raised to the year number, add a terminal value for the period beyond the forecast, then sum everything. Use WACC to discount firm-level cash flows or cost of equity to discount equity cash flows.
How Quintarthai uses it
The 10-year financials and free-cash-flow history needed to build a DCF are on each company's Financials tab, and Quinn's AI take flags the growth and margin assumptions worth stress-testing.
Cross-border note. Build the model in the currency the company actually reports and earns in — CAD for most TSX issuers, USD for US issuers — and use a matching discount rate. Converting the final per-share value to your home currency at the end avoids mixing currencies inside the model.
FAQ
How many years should I forecast?
Typically 5 to 10 years of explicit projections, after which a terminal value captures everything beyond. Forecasting much further is rarely reliable because business conditions become too uncertain.
Why discount future cash flows at all?
Because money has a time value and future cash carries risk. Discounting reflects both that you could invest a dollar today and earn a return, and that future cash flows may not arrive as projected.
Check your understanding
What is the core principle that makes a DCF discount future cash flows?
A DCF rests on the time value of money: a future dollar is worth less than a dollar today, so each future cash flow is discounted back to present value.