TL;DR
DCF is a comprehensive forward-looking stock valuation model that projects future cash flows. The Graham formula is a simplified rule-of-thumb using EPS and book value. DCF offers more stock valuation precision; Graham offers speed and simplicity.
| Feature | DCF Analysis | Graham Formula |
|---|---|---|
| Creator | John Burr Williams (1938) | Benjamin Graham (1962) |
| Approach | Projects future free cash flows | Uses current EPS and book value |
| Formula | Sum of discounted future FCFs | √(22.5 × EPS × Book Value) |
| Inputs Needed | FCF, growth rate, WACC, terminal value | EPS and Book Value Per Share |
| Time to Calculate | 2-5 minutes with a tool | 10 seconds |
| Accuracy | Higher, but depends on assumptions | Rough estimate, misses growth |
| Growth Consideration | Explicitly modeled | Not directly considered |
| Best For | Growth and mature companies | Stable, asset-heavy value stocks |
Use DCF stock valuation for thorough analysis of any company with predictable cash flows. It handles growth companies, different capital structures, and provides sensitivity analysis.
Use the Graham formula as a quick stock valuation screen for deep value stocks — especially useful for asset-heavy, low-growth companies where book value is meaningful.
Go beyond the Graham formula — try MiniValuator's DCF Calculator for a complete intrinsic stock valuation analysis.
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