Frequently asked questions

pocketDCF is a free stock valuation tool that runs an institutional-grade 10-year DCF (Discounted Cash Flow) model for any US-listed stock. Enter a ticker, and within seconds you get a fair value estimate, Bear/Base/Bull scenarios, an AI risk score, and a BUY/HOLD/SELL signal.

Yes — pocketDCF offers a free tier that lets you run several analyses per month. A premium subscription removes all limits and unlocks unlimited analyses. No credit card is required to start.

pocketDCF currently supports US-listed equities on NYSE, NASDAQ, and AMEX. This ensures the highest data quality and model accuracy. International stocks are in development.

Financial data is sourced from Financial Modeling Prep (FMP) using paid-tier API access, which pulls directly from SEC filings (10-K, 10-Q). This means the numbers you see come from official regulatory documents, not scraped estimates.

DCF is a method to calculate the intrinsic value of a stock by estimating how much cash the business will generate in the future and discounting those cash flows back to today's value. The core insight: a dollar received 10 years from now is worth less than a dollar today, because money can be invested in the meantime.

pocketDCF runs a 3-stage, 10-year DCF model. Stage 1 (years 1–5) uses analyst growth estimates. Stage 2 (years 6–10) gradually mean-reverts margins toward sector averages. Terminal value is blended between Gordon Growth Model and an EV/EBITDA exit multiple. The DCF result is then blended with sector-specific relative valuation (P/FCF for tech, EV/EBITDA for industrials, P/Book for banks).

Intrinsic value is what a business is fundamentally worth based on its future earnings power — independent of what the market currently prices it at. When market price falls significantly below intrinsic value, you have a potential buy opportunity with a built-in margin of safety.

Margin of safety is the gap between intrinsic value and current market price. If a stock's intrinsic value is $100 and it trades at $70, you have a 30% margin of safety. Benjamin Graham recommended buying at 33–50% below intrinsic value to protect against modeling errors and unexpected events.

Terminal value represents all cash flows beyond the 10-year projection window. It typically accounts for 60–80% of total DCF value, which is why small changes in the terminal growth rate assumption (e.g., 2% vs 3%) can shift intrinsic value by 20–30%. pocketDCF blends two terminal value methods to reduce this sensitivity.

pocketDCF runs three DCF scenarios simultaneously. Bear uses pessimistic growth assumptions (P25 of historical FCF). Base uses the central analyst estimate. Bull uses optimistic growth (P75 of historical FCF). This gives you a range of intrinsic values rather than a single point estimate, which is more honest about the inherent uncertainty in forecasting.

WACC (Weighted Average Cost of Capital) is the blended rate a company must earn on its assets to satisfy its investors. In DCF, it's used as the discount rate — future cash flows are divided by (1 + WACC) each year to calculate their present value. A higher WACC means future cash flows are worth less today.

pocketDCF calculates WACC using the CAPM model: Risk-Free Rate (4.3%) + Beta × Equity Risk Premium (5.5%), then adds adjustments for leverage, company size, and FCF volatility. The final WACC is clamped between 7% and 12% to prevent extreme outputs. Mega-cap companies (>$1T market cap) are capped at 10%.

Beta measures how much a stock moves relative to the overall market. Beta of 1.0 = moves with the market. Beta above 1.0 = more volatile. Higher beta → higher cost of equity → higher WACC → lower intrinsic value. pocketDCF uses a bottom-up beta approach based on Damodaran sector tables, which is more stable than raw market beta.

The signal compares the current market price to the Base intrinsic value estimate. BUY means the stock appears to trade below intrinsic value with a meaningful margin of safety. HOLD means fair value is roughly in line with market price. SELL means the stock appears significantly overvalued. This is not financial advice — it's a systematic output of the model.

The AI risk score (1–10) is generated by a large language model that analyzes the company's qualitative factors: competitive moat, leverage, sector headwinds, management track record, and macro exposure. It overlays the quantitative DCF with a qualitative risk layer. A high risk score doesn't mean avoid — it means the DCF uncertainty is higher.

Extreme outputs usually signal a modeling edge case. A very high intrinsic value often means the company has negative net debt (large cash pile) that inflates equity value, or that growth assumptions are optimistic. A very low or negative value often means heavy leverage or negative FCF. Always cross-check with the Bear scenario and the AI commentary.

No. pocketDCF is an analytical tool, not a financial advisor. The outputs are model estimates based on historical data and assumptions about the future. All investing involves risk. Do your own research and consult a licensed financial advisor before making investment decisions.