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Valuation

Value a company by DCF

valuation_dcf · Reads only · Markdown

A DCF valuation from free cash flows and a WACC: present values, terminal value, enterprise and equity value, and a sensitivity grid.

Free*

*Free up to 1,000,000 reads a month for the whole account, then $0.50 per 10,000 reads.

An example

Kuechentechnik Nord should make 1.9, 2.1 and 2.3 million in free cash flow over the next three years. What is it worth at a 9.2% discount rate?

Your agent callsvaluation_dcfFree*

The example business is Hansen & Voss, a restaurant-equipment wholesaler in Hamburg with 60 staff. The reply is the one the tool really gives.

With these arguments
{
  "cash_flows": [
    {
      "year": 2027,
      "free_cash_flow": 1.9
    },
    {
      "year": 2028,
      "free_cash_flow": 2.1
    },
    {
      "year": 2029,
      "free_cash_flow": 2.3,
      "ebitda": 3.4
    }
  ],
  "wacc": 0.092,
  "terminal": {
    "method": "growth",
    "growth": 0.015
  },
  "net_debt": 4.2,
  "currency": "EUR"
}
What comes back
{
  "years": [
    {
      "year": 2027,
      "period": 1,
      "free_cash_flow": 1.9,
      "discount_period": 1,
      "discount_factor": 0.915751,
      "present_value": 1.74
    },
    {
      "year": 2028,
      "period": 2,
      "free_cash_flow": 2.1,
      "discount_period": 2,
      "discount_factor": 0.8386,
      "present_value": 1.76
    }
  ],
  "present_value_of_cash_flows": 5.27,
  "terminal_value": {
    "method": "growth",
    "growth": 0.015,
    "value": 30.32,
    "discount_period": 3,
    "implied_exit_multiple": 8.917112,
    "present_value": 23.28,
    "share_of_enterprise_value": 0.815508
  },
  "enterprise_value": 28.55,
  "net_debt": 4.2,
  "adjustments": [],
  "equity_value": 24.35,
  "sensitivity": {
    "wacc": [
      0.082,
      0.087
    ],
    "growth": [
      0.005,
      0.01
    ],
    "enterprise_value": [
      [
        29.06,
        30.84
      ],
      [
        27.26,
        28.81
      ]
    ],
    "equity_value": [
      [
        24.86,
        26.64
      ],
      [
        23.06,
        24.61
      ]
    ]
  },
  "currency": "EUR",
  "method": "Free cash flow discounted at the WACC at the end of each year. Terminal value by Gordon growth, FCF x (1 + g) / (WACC - g), discounted with the last year. Equity value = enterprise value - net debt + adjustments."
}

Use it when

To value a company from its forecast cash flows.

What it does

A discounted cash flow valuation from free cash flows (or EBIT, depreciation, capex and the change in working capital, with tax_rate) and a WACC: each year's present value, the terminal value by Gordon growth or an exit multiple, enterprise value, equity value after net debt, the value per share, the terminal value's share and a WACC by growth (or exit multiple) grid. End-of-year discounting, or mid_year. Rates are decimals: 0.09 is 9%.

What comes back

years (free_cash_flow, discount_period, discount_factor, present_value), present_value_of_cash_flows, terminal_value (method, value, present_value, share_of_enterprise_value, implied_exit_multiple or implied_growth), enterprise_value, net_debt, adjustments, equity_value, value_per_share when shares are given, sensitivity (wacc by growth or exit_multiple, with enterprise_value and equity_value) and method. Every reply also carries cost_usd and balance_usd.

Inputs

NameTypeWhat it is
cash_flowsRequiredarray of objectsThe forecast years in order, the first one year from the valuation date. 1 to 30 items.
cash_flows[].yearinteger1,900 to 2,200.
cash_flows[].free_cash_flownumberUnlevered free cash flow. Or give ebit and the parts below.
cash_flows[].ebitnumber
cash_flows[].depreciationnumber
cash_flows[].capexnumber
cash_flows[].nwc_changenumberThe increase in net working capital (a decrease is negative).
cash_flows[].ebitdanumberFor an exit multiple, and the implied multiple of a growth terminal value.
waccRequirednumberThe discount rate. A decimal: 0.09 is 9%. At most 1.
terminalRequiredobject
terminal.methodRequiredstringOne of: growth,exit_multiple.
terminal.growthnumberGrowth after the last year, for method growth. A decimal: 0.09 is 9%. -0.5 to 0.5.
terminal.multiplenumberFor method exit_multiple: 8 is 8x. At most 1,000.
terminal.metricstringOne of: ebitda,ebit. Default: ebitda.
terminal.metric_valuenumberThe metric the exit multiple applies to; the last year's by default.
tax_ratenumberNeeded when a year gives ebit instead of free_cash_flow. A decimal: 0.09 is 9%. 0 to 1.
mid_yearbooleanCash flows arrive mid-year, so each is discounted half a year less. Default: false.
net_debtnumberDefault: 0.
adjustmentsarray of objectsUp to 20 items.
adjustments[].labelRequiredstring1 to 200 characters.
adjustments[].amountRequirednumberAdded to equity value; negative to take away.
sharesnumber
sensitivityobject
sensitivity.stepsinteger1 to 3. Default: 2.
sensitivity.wacc_stepnumber0.0005 to 0.05. Default: 0.005.
sensitivity.growth_stepnumber0.0005 to 0.05. Default: 0.005.
sensitivity.multiple_stepnumber0.1 to 5. Default: 0.5.
currencystringShown with the figures, e.g. EUR. Nothing is converted. Up to 10 characters.

The call

Over MCP, call valuation_dcf on https://api.conecto.chat/mcp/valuation. Over REST:

Terminal
curl -X POST https://api.conecto.chat/v1/tools/valuation_dcf \
  -H "Authorization: Bearer $CONECTO_KEY" \
  -H "Content-Type: application/json" \
  -d '{"cash_flows":[{"year":2027,"free_cash_flow":1.9},{"year":2028,"free_cash_flow":2.1},{"year":2029,"free_cash_flow":2.3,"ebitda":3.4}],"wacc":0.092,"terminal":{"method":"growth","growth":0.015},"net_debt":4.2,"currency":"EUR"}'

When it refuses

A refused call costs nothing and says what to do next.

CodeWhenWhat to do
invalid_input400The growth rate is at or above the WACC, a year has neither free cash flow nor EBIT, EBIT came without a tax rate, or an exit multiple has no EBITDA to apply to.The message names the figure: give it, or set the growth rate below the WACC.

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