references/dcf.md

# longbridge-dcf

Build a step-by-step DCF model for any listed company using Longbridge financial data, arriving at an intrinsic value per share and margin of safety versus the current price.

## Workflow

### Step 1 — Fetch raw financial data

```bash
# Cash flow statement (FCF inputs)
longbridge financial-report <SYMBOL> --kind CF --format json

# Income statement (revenue growth, margins)
longbridge financial-report <SYMBOL> --kind IS --format json

# Beta and market cap for WACC
longbridge calc-index <SYMBOL> --format json
```

Run `longbridge financial-report --help` and `longbridge calc-index --help` to verify available flags.

### Step 2 — Calculate historical FCF

`FCF = Operating Cash Flow − Capital Expenditure`

Extract the last 3–5 years of operating cash flow and capex from the CF statement. Compute FCF for each year and derive the compound annual growth rate (CAGR).

### Step 3 — Project FCF

Use a two-stage model:

- **Stage 1 (years 1–5)**: Apply an analyst-estimated or CAGR-derived growth rate. Ask the user if they want a bull / base / bear case.
- **Stage 2 (terminal)**: Apply a long-run growth rate `g` (default: GDP growth rate of the company's primary market, typically 2–4%).

### Step 4 — Estimate WACC

```
WACC = Wd × Rd × (1 − t) + We × Re
Re  = Rf + β × ERP
```

| Input                     | Source                                                                            |
| ------------------------- | --------------------------------------------------------------------------------- |
| Beta (β)                  | `longbridge calc-index <SYMBOL> --format json`                                    |
| Risk-free rate (Rf)       | 10-year government bond yield of primary market (US: ~4.2%, CN: ~2.3%, HK: ~4.0%) |
| Equity risk premium (ERP) | Damodaran country ERP (US: ~4.6%, CN: ~7%, HK: ~6%)                               |
| Debt ratio (Wd)           | From balance sheet (total debt / (total debt + market cap))                       |
| Cost of debt (Rd)         | Interest expense / total debt from IS + BS                                        |
| Tax rate (t)              | Effective tax rate from IS                                                        |

### Step 5 — Terminal value

`TV = FCF₅ × (1 + g) / (WACC − g)`

Common alternative: exit multiple method — apply an EV/EBITDA multiple consistent with mature peers.

### Step 6 — Intrinsic value

1. Discount each projected FCF to present value at WACC.
2. Discount terminal value to present value.
3. Sum all PVs → Enterprise Value.
4. Subtract net debt; add cash → Equity Value.
5. Divide by diluted shares outstanding → Intrinsic Value per Share.

### Step 7 — Margin of safety

`Margin of Safety = (Intrinsic Value − Current Price) / Intrinsic Value × 100%`

Positive = undervalued; negative = overvalued. Show sensitivity table for ±1% WACC and ±1% terminal growth.

## CLI

```bash
longbridge financial-report --help
longbridge calc-index --help

longbridge financial-report <SYMBOL> --kind CF --format json
longbridge financial-report <SYMBOL> --kind IS --format json
longbridge calc-index <SYMBOL> --format json
```

## Output

Present results as:

1. Historical FCF table (3–5 years).
2. Projected FCF table (5 years, 3 scenarios if requested).
3. WACC components breakdown.
4. Intrinsic value per share.
5. Margin of safety vs current price.
6. Sensitivity matrix (WACC × terminal growth rate).
7. Key assumptions and caveats.

Always include a disclaimer: DCF is highly sensitive to assumptions; treat output as a range, not a precise target.

## Error handling

| Situation                       | 简体回复                                               | 繁體回覆                                     | English reply                                                                            |
| ------------------------------- | ------------------------------------------------------ | -------------------------------------------- | ---------------------------------------------------------------------------------------- |
| `command not found: longbridge` | 请安装 longbridge-terminal 或检查 MCP 配置。           | 請安裝 longbridge-terminal 或檢查 MCP 配置。 | Install longbridge-terminal or check MCP config.                                         |
| stderr: `not logged in`         | 请运行 `longbridge auth login`。                       | 請執行 `longbridge auth login`。             | Run `longbridge auth login`.                                                             |
| No CF data available            | 该标的暂无现金流数据，可能是上市不足三年或非标准财报。 | 該標的暫無現金流數據，可能是上市不足三年。   | No cash flow data; the company may be too recently listed or use non-standard reporting. |
| Negative FCF history            | 历史 FCF 为负，DCF 模型需用户提供未来盈利假设。        | 歷史 FCF 為負，需用戶提供未來盈利假設。      | Historical FCF is negative; DCF requires user-supplied future profitability assumptions. |