dcf-valuation

# DCF Valuation Skill

## Workflow Checklist

Copy and track progress:
```
DCF Analysis Progress:
- [ ] Step 1: Gather financial data
- [ ] Step 2: Calculate FCF growth rate
- [ ] Step 3: Estimate discount rate (WACC)
- [ ] Step 4: Project future cash flows (Years 1-5 + Terminal)
- [ ] Step 5: Calculate present value and fair value per share
- [ ] Step 6: Run sensitivity analysis
- [ ] Step 7: Validate results
- [ ] Step 8: Present results with caveats
```

## Step 1: Gather Financial Data

Call the `financial_search` tool with these queries:

### 1.1 Cash Flow History
**Query:** `"[TICKER] annual cash flow statements for the last 5 years"`

**Extract:** `free_cash_flow`, `net_cash_flow_from_operations`, `capital_expenditure`

**Fallback:** If `free_cash_flow` missing, calculate: `net_cash_flow_from_operations - capital_expenditure`

### 1.2 Financial Metrics
**Query:** `"[TICKER] financial metrics snapshot"`

**Extract:** `market_cap`, `enterprise_value`, `free_cash_flow_growth`, `revenue_growth`, `return_on_invested_capital`, `debt_to_equity`, `free_cash_flow_per_share`

### 1.3 Balance Sheet
**Query:** `"[TICKER] latest balance sheet"`

**Extract:** `total_debt`, `cash_and_equivalents`, `current_investments`, `outstanding_shares`

**Fallback:** If `current_investments` missing, use 0

### 1.4 Analyst Estimates
**Query:** `"[TICKER] analyst estimates"`

**Extract:** `earnings_per_share` (forward estimates by fiscal year)

**Use:** Calculate implied EPS growth rate for cross-validation

### 1.5 Current Price
**Query:** `"[TICKER] price snapshot"`

**Extract:** `price`

### 1.6 Company Facts
**Query:** `"[TICKER] company facts"`

**Extract:** `sector`, `industry`, `market_cap`

**Use:** Determine appropriate WACC range from [sector-wacc.md](sector-wacc.md)

## Step 2: Calculate FCF Growth Rate

Calculate 5-year FCF CAGR from cash flow history.

**Cross-validate with:** `free_cash_flow_growth` (YoY), `revenue_growth`, analyst EPS growth

**Growth rate selection:**
-