Smart Living Finds — Master Tools Index

AI Stock Valuation & Margin of Safety Calculator

This tool uses a simplified two-stage Discounted Earnings Model to estimate the **Intrinsic Value** of a stock, based on its current earnings, future growth potential, and your personal risk-adjusted return requirement.

Current Earnings Per Share (EPS) (₹)

₹

Current Market Price (₹)

₹

High Growth Rate (5 Years) (%)

%

Required Rate of Return (Discount Rate) (%)

%

Terminal Growth Rate (Perpetual) (%)

%

Payout Ratio (as FCF proxy) (%)

%

Valuation Outcome

Intrinsic Value per Share

₹0.00

Margin of Safety (MOS)

0.0%

Investment Verdict

Analyze Inputs

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The Discounted Cash Flow (DCF) Principle

The Intrinsic Value of a company is the present value of all its future cash flows. Our tool simplifies this by using Earnings Per Share (EPS) and a two-stage growth model to calculate this value, giving you a crucial benchmark against the **Current Market Price**.

Mathematical Breakdown (Two-Stage DCF Proxy)

The value is the sum of two components: the Present Value of the **High Growth Period** (5 years) and the Present Value of the **Terminal Value** (Perpetuity).

1. **Step 1: Calculate Cash Flows (CF) for High Growth Period ($t=1$ to $5$):** $$CF_t = \text{EPS} \times (1 + G_1)^t \times \text{Payout Ratio}$$
2. **Step 2: Calculate Terminal Value ($TV$) in Year 5:** $$TV_5 = \frac{CF_6}{R - G_{term}}$$ (Where $R$ is the Discount Rate and $G_{term}$ is the Terminal Growth Rate)
3. **Step 3: Calculate Present Value of All Components:** $$\text{Intrinsic Value} = \sum_{t=1}^{5} \frac{CF_t}{(1+R)^t} + \frac{TV_5}{(1+R)^5}$$

If your **Required Rate of Return ($R$)** is lower than the **Terminal Growth Rate ($G_{term}$)**, the model mathematically breaks, indicating the company's valuation cannot be sustained.

Understanding Margin of Safety (MOS)

The Margin of Safety, championed by Benjamin Graham, is the percentage difference between the **Intrinsic Value** (what the stock is truly worth) and the **Current Market Price**. A positive and large MOS gives you a cushion against estimation errors and market volatility.

$$MOS = \left( \frac{\text{Intrinsic Value} - \text{Market Price}}{\text{Intrinsic Value}} \right) \times 100$$

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