Start from the default model, then make it yours
The DCF page loads Intrinsic Alpha's system assumptions for the selected stock. Use that as a baseline, then change the inputs you disagree with. The fair value updates from your inputs, so you can see exactly which assumption changes the outcome.
Screenshot placeholder: DCF page showing default model tab, valuation output, model selector, and editable assumptions
- Use Default model to return to the system assumptions after viewing a saved valuation.
- Save a valuation when you have a scenario you want to revisit from the saved DCF dashboard.
- Share a valuation only after saving it. Shared links preserve the model inputs so someone else can inspect the same scenario.
Choose the cash-flow basis deliberately
The model selector changes the starting cash-flow line and, for firm models, how net debt is handled. If the same company looks attractive only under one basis, understand why before trusting the result.
- FCFE: Use Free cash flow to equity when you want to value cash available to common shareholders after reinvestment and debt effects.
- Net income: Use Net income when cash flow is unusually noisy and you want an earnings-based cross-check. Be careful with companies where accounting earnings differ sharply from cash generation.
- FCFF: Use Free cash flow to firm when you want to value the operating business before subtracting net debt. This is useful for companies with meaningful leverage or cash balances.
- FCFF before CapEx: Use this as a stress-test view of operating cash production. It should not be the only anchor for capital-intensive businesses.
Change assumptions one at a time
Most DCF mistakes come from making growth too high, discount rates too low, or terminal growth too generous. Move one input at a time and watch whether fair value changes modestly or dramatically.
Screenshot placeholder: DCF assumption controls for base cash flow, growth, discount rate, terminal growth, projection years, and net debt
- Base cash flow is the starting dollar amount. If it reflects a boom year or a loss year, normalize it before trusting the output.
- Growth rate applies across the projection unless you override individual years. Use yearly growth overrides for ramps, slowdowns, or recovery periods.
- Discount rate is your required return. Higher uncertainty should usually mean a higher discount rate.
- Terminal growth applies after the explicit forecast period. Keep it below the discount rate and avoid treating a mature company like it can outgrow the economy forever.
- Net debt affects FCFF and FCFF before CapEx models because enterprise value must be converted back to equity value.
If a small terminal-growth change flips the stock from expensive to cheap, the model is telling you the conclusion is highly assumption-sensitive.
Build a bear, base, and bull case
Save separate valuations for conservative, base, and optimistic assumptions. When earnings, guidance, or price changes, open the saved DCF dashboard and update the scenario instead of rebuilding the model from memory.
- Bear case: lower starting cash flow, slower growth, higher discount rate, or lower terminal growth.
- Base case: assumptions you can defend using the company's recent fundamentals and management commentary.
- Bull case: what has to go right. If the current price already requires the bull case, the margin of safety is probably weak.