Methodology

How the model works

The model projects a company’s unlevered free cash flow (UFCF) five years forward, discounts each year back to the present at the company’s weighted average cost of capital (WACC), and adds a terminal value representing all cash flows beyond Year 5 — calculated with the Gordon Growth formula at a conservative long-run growth rate. Summing the discounted explicit-year cash flows and the discounted terminal value gives an enterprise value; subtracting net debt and dividing by diluted shares outstanding gives an intrinsic value per share.

WACC is derived via the Capital Asset Pricing Model (CAPM): the risk-free rate plus levered beta times the equity risk premium, blended with the after-tax cost of debt by capital structure weight. The terminal growth rate is always held below WACC — a mathematical requirement for a finite terminal value, and one enforced at the database level so a data-entry error can never produce a nonsensical result.

Because a DCF’s output is sensitive to its two most uncertain inputs — WACC and terminal growth — every memo also includes a sensitivity table recomputing intrinsic value across a grid of nearby WACC/growth combinations, so the base case is shown in context rather than presented as a single precise number.

Data sources

Company financials and market prices are entered manually today, drawn from public filings and market data at the time of writing. A future, fully-automated scraper-driven version of this pipeline is fully architected but intentionally not yet running.