P/E asks how many times earnings the market will pay; DCF discounts future free cash flow back to today. They give different answers for the same stock — reading them side by side beats trusting either alone.
Try:
How this DCF works
Free cash flow = operating cash flow − capex − stock-based compensation (optional), all from the annual and quarterly reports the company files with the SEC.
Two stages: revenue growth fades from its recent actual rate to the terminal rate, and the free-cash-flow margin moves from today’s level to a mature one — expansion capex falls back to the level of depreciation.
After the forecast period the business grows at the terminal rate forever; the terminal value is next year’s cash flow ÷ (discount rate − terminal growth).
Discount each year’s cash flow and the terminal value back to today to get enterprise value; add cash, subtract debt and divide by diluted shares for value per share.
The discount rate is the annual return you require. Run it backwards and you get the return implied by today’s price, and the growth the market is pricing in.