Last week I posted an article of Stocks showing at least 50% upside using a DCF model. I have now made an application which uses the most interesting parts of the model. You can download it using this link. Here is a screenshot:
The application is quite small, and requires no extra libraries, as far as I know. It is for any Windows platform. It’s all pretty self-explanatory, really. You enter in operating profit, dividend cover, etc., press the Calculate button, and out pops the intrinsic value for the value of common stock using DCF.
The model assumes that operating profits grow at a rate of ROCE*(1-1/DCOV), where DCOV is the dividend cover, for the next 5 years. It then assumes market returns for the terminal stage. If you are lazy, then you can leave the terminal cost of capital, terminal growth, cost of capital, and even tax rate, alone. Operating profit, dividend cover, ROCE and net cash are the numbers you are likely to want to play with first.