What is a discounted cash flow and how is it calculated?
A discounted cash flow, or DCF, is a valuation method that estimates what a company is worth today by adding up the money it is expected to generate in the future and bringing it back to the present. The underlying idea is simple: a thousand euros ten years from now is worth less than a thousand euros today, and discounting puts a number on that gap.
The calculation runs in three stages. The first five years are projected explicitly from recent free cash flow. From year six to year ten, growth fades towards a sustainable rate instead of dropping off a cliff. Beyond that comes the terminal value, which captures everything that follows. Adding the three stages and discounting them at the WACC gives the value of the company; subtract debt, add cash, and you arrive at the value per share.