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DCF Analysis Conclusion

DCF analysis estimates a company's current value based on projections of its future cash flows, which are discounted to present value. The tutorial demonstrated the basic DCF technique to value stocks, although analysts have different methods. While DCF analysis requires more work than metrics like P/E, it treats a company as a business rather than just stock prices and considers the factors influencing future performance. External resources on valuation techniques and case studies are recommended for further understanding DCF analysis.

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410 views1 page

DCF Analysis Conclusion

DCF analysis estimates a company's current value based on projections of its future cash flows, which are discounted to present value. The tutorial demonstrated the basic DCF technique to value stocks, although analysts have different methods. While DCF analysis requires more work than metrics like P/E, it treats a company as a business rather than just stock prices and considers the factors influencing future performance. External resources on valuation techniques and case studies are recommended for further understanding DCF analysis.

Uploaded by

hamrah1363
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© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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DCF Analysis: Conclusion 1

DCF Analysis: Conclusion


By Ben McClure
Contact Ben

As you have seen, DCF analysis tries to work out the value of a company today, based
on projections of how much money it will generate in the future. The basic idea is that
the value of any company is the sum of the cash flows that it produces in the future,
discounted to the present at an appropriate rate.

In this tutorial, we have shown you the basic technique used to generate fair values for
the stocks that you follow. But keep in mind that this is just one approach to doing
DCF analysis; every analyst has his or her own theories on how it should be done.

Although manually working your way through all the numbers in DCF analysis can
be a time-consuming and tricky process at times, it's not impossible. Yes, using a DCF
model probably entails a lot more work than relying on traditional valuation measures
such as the P/E ratio, but we hope this step-by-step guide has shown you that it is
worth the effort.

DCF analysis treats a company as a business rather than just a ticker symbol and a
stock price, and it requires you to think through all the factors that will affect the
company's performance. What DCF analysis really gives you is an appreciation for
what drives stock values.

Here are some external resources that you may want to check out:

Damodaran Online - Aswarth Damodaran, professor of finance at New York


University's Stern School of Business, has created an excellent website devoted to
valuation techniques. He offers numerous DCF models set up in Excel spreadsheets,
and he gives details on the intricacies of the models.

Valuing Intel: A Strange Tale of Analysts And Announcements - Bradford Cornell,


professor at UCLA's Anderson Graduate School of Management, has produced an
excellent DCF analysis that assesses market and stock analysts' reactions to an Intel
Corp. earnings announcement.

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