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Nvidia
Expected Fair Value$321.47
Current Stock Price$229.28
WACC15.2%
Bear Fair Value$97.68
Base Fair Value$257.54
Bull Fair Value$673.11
Scenario DCF
For informational and educational purposes only • Not investment advice.
Compare Scenario DCF values across companies
Apple
Expected Fair Value$195.11
Current Stock Price$336.64
WACC10.4%
Bear Fair Value$116.97
Base Fair Value$180.88
Bull Fair Value$301.70
Alphabet
Expected Fair Value$658.58
Current Stock Price$351.66
WACC10.7%
Bear Fair Value$203.14
Base Fair Value$518.91
Bull Fair Value$1,393.38
Microsoft
Expected Fair Value$306.07
Current Stock Price$535.07
WACC10.2%
Bear Fair Value$168.52
Base Fair Value$278.51
Bull Fair Value$498.76
Bear Probability
%
Range: 0–100%
Base Probability
%
Range: 0–100%
Bull Probability
%
Range: 0–100%
Time Horizon
Equity Risk Premium
%
Range: 2–10%
What is a Scenario DCF Valuation?
A Scenario Discounted Cash Flow (Scenario DCF) valuation estimates a company's intrinsic value under several possible future outcomes rather than relying on a single forecast. Instead of assuming one set of Revenue Growth, Discount Rate and Terminal Growth assumptions, the model evaluates Bear, Base and Bull scenarios independently.
Each scenario is valued using a complete Discounted Cash Flow model. The resulting Bear, Base and Bull Fair Values are then combined using their assigned probabilities to calculate one probability-weighted Expected Fair Value.
Scenario DCF Formulas
Each Bear, Base and Bull scenario is valued using the standard Discounted Cash Flow framework. The final result is the probability-weighted average of the three scenario valuations.
Enterprise Value
Terminal Value
Fair Value per Share
Expected Fair Value
How the Scenario DCF Works
The Scenario DCF estimates a company's value under three possible future outcomes. Each scenario is valued independently using a full Discounted Cash Flow model before combining the results into one probability-weighted Expected Fair Value.
Key Model Assumptions
• Three scenarios (Bear, Base and Bull) represent a range of possible future outcomes.
• Each scenario is valued independently using a complete Discounted Cash Flow model.
• Current Revenue and Free Cash Flow use trailing twelve-month (TTM) values when available, with the latest annual values used as a fallback.
• If current Free Cash Flow is negative or materially different from recent history, the model uses the average of the last three positive annual Free Cash Flow values as a normalized starting point.
• Revenue Growth gradually moves toward the Terminal Growth Rate, while the Free Cash Flow Margin moves toward a normalized target based on the median of up to the five most recent valid historical Free Cash Flow Margins.
• Future Free Cash Flows are discounted using each scenario's estimated WACC.
• The Risk-Free Rate is based on the U.S. 10-Year Treasury yield published by the Federal Reserve Board.
• Scenario probabilities adjust automatically so Bear, Base and Bull add up to 100%.
• The final valuation is the probability-weighted average of the three scenario values.
• Each scenario is valued independently using a complete Discounted Cash Flow model.
• Current Revenue and Free Cash Flow use trailing twelve-month (TTM) values when available, with the latest annual values used as a fallback.
• If current Free Cash Flow is negative or materially different from recent history, the model uses the average of the last three positive annual Free Cash Flow values as a normalized starting point.
• Revenue Growth gradually moves toward the Terminal Growth Rate, while the Free Cash Flow Margin moves toward a normalized target based on the median of up to the five most recent valid historical Free Cash Flow Margins.
• Future Free Cash Flows are discounted using each scenario's estimated WACC.
• The Risk-Free Rate is based on the U.S. 10-Year Treasury yield published by the Federal Reserve Board.
• Scenario probabilities adjust automatically so Bear, Base and Bull add up to 100%.
• The final valuation is the probability-weighted average of the three scenario values.
Step 1 — Define Bear, Base and Bull Assumptions
Base Revenue Growth = Historical Revenue CAGR
Revenue Growth Scenarios:
Bear Revenue Growth = Base Revenue Growth − Revenue Adjustment
Base Revenue Growth = Historical Revenue CAGR
Bull Revenue Growth = Base Revenue Growth + Revenue Adjustment
WACC Scenarios:
Bear WACC = Base WACC + 1.0%
Base WACC = Equity Weight × Cost of Equity + Debt Weight × After-Tax Cost of Debt
Bull WACC = Base WACC − 1.0%
Terminal Growth Scenarios:
Bear Terminal Growth = Base Terminal Growth − 1.0%
Base Terminal Growth = Reported or Default Terminal Growth, capped between 0% and 3.5%
Bull Terminal Growth = Base Terminal Growth + 1.0%
The Base scenario uses the company's historical Revenue Compound Annual Growth Rate (CAGR), estimated WACC and available Terminal Growth assumption.
Bear and Bull Revenue Growth are derived from the Base rate using a standardized adjustment based on the magnitude of the historical Revenue CAGR, with a minimum adjustment basis applied when historical growth is very low. This creates lower and higher growth assumptions while keeping the scenarios systematically related to the Base case.
For WACC, the Bear scenario adds one percentage point to the Base rate, while the Bull scenario subtracts one percentage point. Terminal Growth is adjusted in the same direction, with Bear one percentage point below and Bull one percentage point above the Base assumption.
These adjustments provide a consistent framework for comparing Bear, Base and Bull outcomes across companies.
Step 2 — Project Revenue in Each Scenario
Revenueₜ = Revenueₜ₋₁ × (1 + Revenue Growthₜ)
Revenue Growth Scenarios:
Bear Revenue Growth = Base Revenue Growth − Revenue Adjustment
Base Revenue Growth = Historical Revenue CAGR
Bull Revenue Growth = Base Revenue Growth + Revenue Adjustment
Revenue is projected separately for the Bear, Base and Bull scenarios. Each scenario begins with its own Revenue Growth assumption, creating three different Revenue paths over the forecast period.
As the company matures, Revenue Growth gradually converges toward that scenario's Terminal Growth Rate. This reflects the assumption that growth moves toward a more sustainable long-term level over time.
The Bear scenario produces the lowest Revenue forecast, the Base scenario represents the central outcome, and the Bull scenario produces the highest Revenue forecast. These projected Revenues are then used to estimate Free Cash Flow in the next step.
Step 3 — Estimate Free Cash Flow
Free Cash Flowₜ = Revenueₜ × FCF Marginₜ
FCF Margin = Free Cash Flow / Revenue
To estimate future Free Cash Flow, Projected Revenue is multiplied by the Free Cash Flow Margin.
The Free Cash Flow Margin gradually moves toward a normalized long-term level based on the median of up to the five most recent valid historical Free Cash Flow Margins rather than remaining constant throughout the forecast.
The same margin path is used across all three scenarios, so differences in Free Cash Flow are driven by their different Revenue forecasts.
Step 4 — Discount Future Free Cash Flows
Present Valueₜ = Free Cash Flowₜ / (1 + WACC)t
WACC Scenarios:
Bear WACC = Base WACC + 1.0%
Base WACC = Estimated Company WACC
Bull WACC = Base WACC − 1.0%
PV Forecast Cash Flows = Σ Present Valueₜ
Bear PV Forecast Cash Flows = Σ Bear Present Valueₜ
Base PV Forecast Cash Flows = Σ Base Present Valueₜ
Bull PV Forecast Cash Flows = Σ Bull Present Valueₜ
Future Free Cash Flows are discounted back to their present value using the WACC of each scenario. A higher WACC reduces present value, while a lower WACC increases it.
The discounted Free Cash Flows are then added together to determine the Present Value of Forecast Free Cash Flows for each scenario.
Step 5 — Calculate Terminal Value
Terminal Cash Flow = Final Forecast FCF × (1 + Terminal Growth)
Terminal Growth Scenarios:
Bear Terminal Growth = Base Terminal Growth − 1.0%
Base Terminal Growth = Reported or Default Terminal Growth (0%–3.5%)
Bull Terminal Growth = Base Terminal Growth + 1.0%
Terminal Value = Terminal Cash Flow / (WACC − Terminal Growth)
PV of Terminal Value = Terminal Value / (1 + WACC)n
Bear PV Terminal Value = Bear Terminal Value / (1 + Bear WACC)n
Base PV Terminal Value = Base Terminal Value / (1 + Base WACC)n
Bull PV Terminal Value = Bull Terminal Value / (1 + Bull WACC)n
Terminal Value estimates all Free Cash Flows expected after the explicit forecast period.
Each scenario uses its own final forecast Free Cash Flow, WACC and Terminal Growth assumption.
The resulting Terminal Value is measured at the end of the forecast period and is therefore discounted back to today's value using the scenario's WACC.
Step 6 — Calculate Enterprise Value
Enterprise Value = PV Forecast FCFs + PV Terminal Value
Bear Enterprise Value = Bear PV Forecast FCFs + Bear PV Terminal Value
Base Enterprise Value = Base PV Forecast FCFs + Base PV Terminal Value
Bull Enterprise Value = Bull PV Forecast FCFs + Bull PV Terminal Value
Enterprise Value is calculated separately for the Bear, Base and Bull scenarios by adding the Present Value of Forecast Free Cash Flows to the Present Value of Terminal Value.
Step 7 — Calculate Equity Value and Fair Value per Share
Equity Value = Enterprise Value − Net Debt
Net Debt = Total Debt − Cash & Short-Term Investments
Bear Equity Value = Bear Enterprise Value − Net Debt
Base Equity Value = Base Enterprise Value − Net Debt
Bull Equity Value = Bull Enterprise Value − Net Debt
Fair Value per Share = Equity Value / Shares Outstanding
Bear Fair Value per Share = Bear Equity Value / Shares Outstanding
Base Fair Value per Share = Base Equity Value / Shares Outstanding
Bull Fair Value per Share = Bull Equity Value / Shares Outstanding
Enterprise Value represents the value of the company's operations. To determine the value attributable to shareholders, Net Debt is deducted from the Enterprise Value of each scenario.
The resulting Equity Value is then divided by Shares Outstanding to estimate the Fair Value per Share for the Bear, Base and Bull scenarios.
If a scenario produces a negative Equity Value after deducting Net Debt, the Fair Value per Share is shown as zero rather than a negative share value.
Since Net Debt and Shares Outstanding are the same across all three scenarios, differences in Fair Value per Share reflect the different Enterprise Values produced by the Bear, Base and Bull assumptions.
Step 8 — Calculate Expected Fair Value
Expected Fair Value = Σ (Scenario Fair Value × Scenario Probability)
Bear Contribution =
Bear Fair Value × Bear Probability
Bear Fair Value × Bear Probability
Base Contribution =
Base Fair Value × Base Probability
Base Fair Value × Base Probability
Bull Contribution =
Bull Fair Value × Bull Probability
Bull Fair Value × Bull Probability
Expected Fair Value =
Bear Contribution + Base Contribution + Bull Contribution
Each scenario's Fair Value per Share is weighted by its assigned probability. The three weighted values are then combined to calculate the Expected Fair Value per Share.
Scenarios with a higher probability therefore have a greater influence on the final valuation.