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"""Boundary and invalid-input tests for the DCF engine."""
import pandas as pd
import pytest
from app.services.data_service import _run_dcf
def _fcf_series(base: float, growth: float) -> pd.Series:
"""Return a two-point historical FCF series whose median YoY growth equals `growth`."""
prior = base / (1 + growth)
return pd.Series([prior, base], index=pd.to_datetime(["2023-09-30", "2024-09-30"]))
def _expected_mid_year_enterprise_value(
base_fcf: float,
growth: float,
wacc: float,
terminal_growth: float,
projection_years: int,
) -> float:
projected = [base_fcf * ((1 + growth) ** year) for year in range(1, projection_years + 1)]
discounted = [fcf / ((1 + wacc) ** (year - 0.5)) for year, fcf in enumerate(projected, start=1)]
terminal_fcf = projected[-1] * (1 + terminal_growth)
terminal_value = terminal_fcf / (wacc - terminal_growth)
terminal_value_pv = terminal_value / ((1 + wacc) ** (projection_years - 0.5))
return sum(discounted) + terminal_value_pv
def test_run_dcf_two_year_horizon_uses_mid_year_discounting() -> None:
fcf = _fcf_series(100.0, 0.05)
expected_enterprise_value = _expected_mid_year_enterprise_value(
base_fcf=100.0,
growth=0.05,
wacc=0.10,
terminal_growth=0.03,
projection_years=2,
)
result = _run_dcf(
fcf_series=fcf,
shares_outstanding=10.0,
wacc=0.10,
terminal_growth=0.03,
projection_years=2,
)
assert result["enterprise_value"] == pytest.approx(expected_enterprise_value)
def test_run_dcf_terminal_growth_equals_wacc_is_error() -> None:
fcf = _fcf_series(100.0, 0.05)
result = _run_dcf(
fcf_series=fcf,
shares_outstanding=10.0,
wacc=0.10,
terminal_growth=0.10,
projection_years=5,
)
assert "error" in result
assert "Terminal growth" in result["error"]
assert "intrinsic_value_per_share" not in result
def test_run_dcf_terminal_growth_above_wacc_is_error() -> None:
fcf = _fcf_series(100.0, 0.05)
result = _run_dcf(
fcf_series=fcf,
shares_outstanding=10.0,
wacc=0.10,
terminal_growth=0.11,
projection_years=5,
)
assert "error" in result
assert "Terminal growth" in result["error"]
assert "intrinsic_value_per_share" not in result
def test_run_dcf_zero_wacc_is_error() -> None:
fcf = _fcf_series(100.0, 0.05)
result = _run_dcf(
fcf_series=fcf,
shares_outstanding=10.0,
wacc=0.0,
terminal_growth=0.03,
projection_years=5,
)
assert "error" in result
assert "WACC" in result["error"]
assert "intrinsic_value_per_share" not in result
def test_run_dcf_negative_base_fcf_is_error() -> None:
"""The most recent FCF is negative, making the DCF not meaningful."""
fcf = pd.Series([100.0, -50.0], index=pd.to_datetime(["2023-09-30", "2024-09-30"]))
result = _run_dcf(
fcf_series=fcf,
shares_outstanding=10.0,
wacc=0.10,
terminal_growth=0.03,
projection_years=5,
)
assert "error" in result
assert "negative" in result["error"].lower() or "zero" in result["error"].lower()
assert "intrinsic_value_per_share" not in result
def test_run_dcf_zero_base_fcf_is_error() -> None:
fcf = pd.Series([100.0, 0.0], index=pd.to_datetime(["2023-09-30", "2024-09-30"]))
result = _run_dcf(
fcf_series=fcf,
shares_outstanding=10.0,
wacc=0.10,
terminal_growth=0.03,
projection_years=5,
)
assert "error" in result
assert "zero" in result["error"].lower()
assert "intrinsic_value_per_share" not in result
def test_run_dcf_zero_shares_returns_empty() -> None:
fcf = _fcf_series(100.0, 0.05)
result = _run_dcf(
fcf_series=fcf,
shares_outstanding=0.0,
wacc=0.10,
terminal_growth=0.03,
projection_years=5,
)
assert result == {}
def test_run_dcf_negative_shares_returns_empty() -> None:
fcf = _fcf_series(100.0, 0.05)
result = _run_dcf(
fcf_series=fcf,
shares_outstanding=-1.0,
wacc=0.10,
terminal_growth=0.03,
projection_years=5,
)
assert result == {}
def test_run_dcf_insufficient_history_returns_empty() -> None:
fcf = pd.Series([100.0], index=pd.to_datetime(["2024-09-30"]))
result = _run_dcf(
fcf_series=fcf,
shares_outstanding=10.0,
wacc=0.10,
terminal_growth=0.03,
projection_years=5,
)
assert result == {}
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