Understanding Levered DCF API vs. DCF Valuation API: What’s the Difference and When to Use Them

Jun 19, 2025 7:37 PM - Sanzhi Kobzhan

Image credit: equity valuation model. DCF.

When it comes to valuing a company, financial tools like the Discounted Cash Flow (DCF) method are popular among investors and analysts. Financial Modeling Prep (FMP) offers two powerful APIs to help with this: the Levered DCF API and the DCF Valuation API. While both tools help estimate a company's worth, they approach it differently. In this article, I'll break down the differences between these two APIs in simple terms and explain when you should use each one.

What Are These APIs?

Before diving into the differences, let's quickly explain what each API does:

Levered DCF API: This API calculates a company's value while considering its debt. It gives you a valuation that accounts for the company's debt obligations, making it a more precise measure of what the company is worth to its shareholders.
DCF Valuation API: This API estimates a company's intrinsic value based on its expected future cash flows and a discount rate. It focuses on the company's overall cash-generating ability without specifically factoring in debt.

Both APIs use the DCF method, which predicts a company's future cash flows and discounts them to their present value. However, the way they handle debt and their focus make them suited for different purposes.

Key Differences Between Levered DCF API and DCF Valuation API

Here's a simple breakdown of how these two APIs differ:

Handling of Debt:
- Levered DCF API: This API explicitly accounts for a company's debt. It calculates the value of the company after subtracting the impact of debt obligations, giving you the equity value (what's left for shareholders).
- DCF Valuation API: This API focuses on the company's total enterprise value, without directly adjusting for debt. It looks at the overall cash flows the business generates, regardless of how the company is financed.
Valuation Output:
- Levered DCF API: Provides a valuation that reflects the company's worth to its equity holders (shareholders). This is the value after paying off debt.
- DCF Valuation API: Gives you the total value of the company, including both equity and debt. This is often called the enterprise value.
Complexity:
- Levered DCF API: Slightly more complex because it incorporates debt into the calculation. It's tailored for situations where understanding the impact of debt is critical.
- DCF Valuation API: Simpler, as it focuses on the company's cash flows without diving into its capital structure (how much debt vs. equity the company has).
Use of Discount Rate:
- Levered DCF API: Uses the cost of equity as the discount rate because it's focused on the value to shareholders after accounting for debt.
- DCF Valuation API: Typically uses the Weighted Average Cost of Capital (WACC), which considers both debt and equity financing, to discount cash flows.

When to Use the Levered DCF API

The Levered DCF API is your go-to choice when you want to understand the value of a company specifically for its shareholders. Here are some situations where it's most useful:

Evaluating Equity Investments: If you're an investor looking to buy stocks or evaluate a company's share price, the Levered DCF API is ideal. It gives you a valuation that reflects what the company is worth after paying off its debts, which is what matters to shareholders.
High-Debt Companies: For companies with significant debt, this API is critical because it accounts for how much debt affects the value available to shareholders.
Mergers and Acquisitions (M&A): In M&A scenarios, buyers often want to know the equity value of a company (after debt) to determine how much they're actually paying for the ownership stake.

For example, if you're analyzing a company like a retailer with heavy loans, the Levered DCF API will help you see how much value is left for shareholders after accounting for those loans.

When to Use the DCF Valuation API

The DCF Valuation API is better suited for situations where you want a broader view of a company's value, regardless of its debt structure. Here's when you should use it:

Overall Company Valuation: If you're assessing the total worth of a business (including both debt and equity), this API gives you a complete picture of the company's enterprise value.
Comparing Companies: When comparing companies in the same industry, the DCF Valuation API is useful because it focuses on cash flows without getting tangled in differences in debt levels.
Early-Stage or Low-Debt Companies: For companies with little to no debt, this API is simpler and sufficient since debt isn't a major factor in their valuation.

For instance, if you're looking at a tech startup with minimal debt, the DCF Valuation API can help you estimate its intrinsic value based on its future cash flow potential.

Which One Should You Choose?

Choosing between the Levered DCF API and the DCF Valuation API depends on your goal:

If you're focused on shareholder value or analyzing a company with significant debt, go with the Levered DCF API. It's designed to give you a clear picture of what's left for equity holders after accounting for debt.
If you want a big-picture valuation of the entire company or are comparing businesses with different debt levels, the DCF Valuation API is the better choice.

A Quick Example

Imagine you're analyzing two companies:

Company A: A manufacturing firm with $50 million in debt.
Company B: A software company with no debt.

For Company A, you'd use the Levered DCF API to understand how much value remains for shareholders after paying off that $50 million debt. For Company B, the DCF Valuation API is enough since there's no debt to worry about, and you just want to know the company's total value based on its cash flows.

Both the Levered DCF API and the DCF Valuation API from Financial Modeling Prep are powerful tools for valuing companies, but they serve slightly different purposes. The Levered DCF API is your best bet when you need to factor in debt and focus on shareholder value, while the DCF Valuation API is great for getting a broad estimate of a company's total worth. By understanding you can pick the right API to make smarter financial decisions.

Other Blogs

Nov 22, 2024 5:08 AM - Parth Sanghvi

Fundamental Analysis: Principles, Types, and How to Use It

Fundamental analysis is one of the most essential tools for investors and analysts alike, helping them assess the intrinsic value of a stock, company, or even an entire market. It focuses on the financial health and economic position of a company, often using key data such as earnings, expenses, ass...

Dec 17, 2024 8:58 AM - Sanzhi Kobzhan

Examining Tesla’s Financial Health Using FinancialModelingPrep’s Ratios API

Tesla, one of the world’s most talked-about electric vehicle manufacturers, attracts a lot of attention from investors and market watchers. By examining a snapshot of Tesla’s financial ratios—such as those provided by FinancialModelingPrep’s Ratios API—we can get a clearer picture of the company’s f...

Dec 22, 2024 7:59 AM - Sanzhi Kobzhan

Two great Software Platform Stocks Similar to Palantir (PLTR)

When it comes to cutting-edge software and data analytics, Palantir Technologies (NYSE: PLTR) is often front and center. But for many investors, it’s important to consider alternative or complementary stocks in the same sector that may offer robust growth potential. As PLTR looks expensive (overvalu...

FMP