The Net Present Value (NPV) tab allows users to estimate a company’s intrinsic value by projecting its future earnings and discounting them back to today’s dollars. This tab is designed to help investors determine whether a stock is overvalued or undervalued based on the fundamentals—not the hype.

Using a few simple assumptions—revenue growth rate, profit margin, discount rate, and a terminal value multiplier—the tool calculates the total present value of the company’s projected net income over a defined period (typically 5 years), plus a terminal value that reflects the company’s estimated worth at the end of that period. It then compares this NPV to the company’s current market cap, offering a clear view of how the current stock price stacks up against its projected future cash flows.

This tab is especially valuable for investors focused on valuation discipline, helping them assess whether they are paying a premium or getting a discount based on the company’s projected performance.

How to Use the “Assumptions” Section

To use the Net Present Value (NPV) model, begin by entering your assumptions into the fields provided:

  • Years of Income – Enter how many years you believe the company will continue generating earnings before reaching its terminal value (typically 5–10 years).
  • Revenue Growth Rate (%) – Estimate the annual percentage by which the company’s revenue will grow.
  • Profit Margin (%) – Input your expectation for the company’s average net profit margin during the forecast period.
  • Terminal Value Multiplier – This is how many times the company’s final-year revenue you believe it will be worth (e.g., a multiplier of 1 means the company will be worth 1× its final-year revenue).
  • Discount Rate (%) – This reflects the expected rate of return required to justify the investment; it adjusts future earnings to their present value by accounting for risk and opportunity cost.

Once all five inputs are entered, click “Calculate” to generate the company’s net present value, which will then be compared to its current market cap to help assess whether the stock appears overvalued or undervalued.

Understanding the Net Present Value Summary

The Net Present Value (NPV) Summary shows how the company’s estimated intrinsic value compares to its current market cap. If the market cap is lower than the NPV, the stock may be undervalued and lower-risk, offering a potential bargain for investors. But if the market cap is significantly higher than the NPV, it suggests the stock is overvalued and higher-risk, meaning future growth expectations may already be priced in.

In this example, the market cap is 350% of the company’s NPV, indicating a high valuation relative to its projected earnings—something investors should approach with caution.

Understanding the Current Metrics Table

The Current Metrics table provides a snapshot of the company’s financial condition at the time of your analysis. It helps you understand the company’s current scale, profitability, valuation, and growth profile before evaluating its future value.

Here’s what each column shows:

  • Market Cap – The total current value of the company’s stock in the market.
  • Revenue – The company’s current annual sales, in millions.
  • Net Income – The company’s current annual profit, after all expenses.
  • P/S Ratio – The current Price-to-Sales ratio, showing how much investors are paying for each dollar of revenue.
  • P/E Ratio – The current Price-to-Earnings ratio, indicating how much investors are paying for each dollar of profit.
  • Tangible Equity – The value of the company’s tangible assets minus liabilities.
  • Revenue Growth Rate – The current or assumed annual growth rate in revenue.
  • Profit Margin – The percentage of revenue that turns into net income.

This table serves as the foundation for your valuation assumptions, helping you compare what the company looks like today to what it may become in the future.

Understanding the 5-Year Revenue Projections Table

The 5-Year Revenue Projections table shows the company’s projected financial performance over the selected forecast period. These figures are calculated based on the user’s assumptions for revenue growth rate and profit margin, and they form the foundation of the Net Present Value (NPV) calculation.

Here’s what each column means:

  • Year – Each row represents one year in the forecast period, starting from Year 0 (today) through Year 5.
  • Revenue ($ billion) – The projected total sales for each year, calculated using the revenue growth rate you entered.
  • Net Income ($ billion) – The projected profits for each year, calculated by applying your profit margin assumption to the forecasted revenue.
  • NPV of Net Income ($ billion) – The present value of each year’s net income, discounted using your selected discount rate. These discounted values are summed to form the total NPV of projected earnings.

This table allows you to see how much value the company is expected to generate year by year—and how much of that value is worth in today’s dollars.

These tables are particularly useful for investors looking to gauge how the company’s market valuation has fluctuated over time in relation to its sales and earnings, which can inform decisions on buying or selling the company’s shares based on historical valuations.

Understanding the Terminal Value Calculation Table

The Terminal Value Calculation table estimates how much the company will be worth at the end of the projection period (Year 5), based on your assumptions. This value represents the long-term worth of the business beyond the forecast window and is a major component of the total Net Present Value (NPV).

Here’s what each row shows:

  • Revenue in Future Year (5) – The projected revenue at the end of the final year (5), based on your assumed revenue growth rate.
  • Terminal Value – Calculated by multiplying final-year revenue by your selected Terminal Value Multiplier (e.g., 1× revenue).
  • Discount Rate – The rate you chose to discount future earnings back to their present value, reflecting time and risk.
  • NPV of Terminal Value – The present value of the terminal value, discounted over the full time period.

This calculation helps you estimate the residual value of the business beyond the initial forecast years and ensures it’s appropriately adjusted for time and risk before being added to the total valuation.

Understanding the Net Present Value Calculation Table

The Net Present Value Calculation table brings together all components of the NPV model to give you a complete picture of the company’s estimated intrinsic value. It adds up the present value of future earnings, tangible equity, and terminal value—then compares that total to the company’s current market cap.

Here’s what each row means:

  • NPV of 5 Years’ Net Income – The total present value of the company’s forecasted earnings over the next 5 years.
  • Current Tangible Equity – The company’s current net asset value (assets minus liabilities), added to the NPV as real, existing value.
  • NPV of Terminal Value – The discounted present value of the company’s estimated value beyond the forecast period.
  • Net Present Value – The sum of all three components above: future earnings + tangible equity + terminal value.
  • Market Cap – The company’s current valuation based on its share price and shares outstanding.
  • Market Cap as % of NPV – A key ratio that shows whether the company is overvalued or undervalued. If the percentage is over 100%, the stock is trading above its estimated intrinsic value.

This final table helps you assess whether the current stock price is justified by projected performance—or whether it’s too expensive based on the numbers.