Earlier this year, I published an article laying out my thoughts and concerns about DCF models. My sense was that their true applicability is close to nulity. The reasoning behind was the sensitivity of these models, the necessity of knowing 100% of companies, which is a rare knowledge DCF-makers have, and some other things. Nonetheless, to each their own and, if one’s strategy works, fantastic.
Great article! I think a DCF serves it purpose because it makes your reasoning in valuation explicit. However, the final result, the calculated value is less usable. In the end, the goal is to find something that is heavily undervalued without knowing exactly by how much. To be directionally right.
Thank you very much for the words and thorough analysis Kevin. Absolutely, it's more about getting a sense of whether valuation makes sense but from a broad perspective. I'm still making my mind about everything, but wanted to put the focus on another part of valuation, this neglected component, which I found very curious.
Hi Giuliano, I suggest you to take Aswath Damodaran courses (both Corporate Finance and Valution). And digest each session slowly (26 sessions per class). You find the recordings on YouTube. They are of immensely value imo. You could potentially write an article for each statement/atypical take.
Hello Edoardo, thank you very much for the recommendation! I partially went over Damodaran's work in school (did my undergrad in pure finance). In any case, his writings and classes are a big pending for me. I suppose I'll eventually go over them, but I have too many things to read hahaha.
I love the warning, though it doesn't matter. I try to read everything. Thank you very much my friend and will be in touch for the notes!
Great article! I think a DCF serves it purpose because it makes your reasoning in valuation explicit. However, the final result, the calculated value is less usable. In the end, the goal is to find something that is heavily undervalued without knowing exactly by how much. To be directionally right.
Thank you very much for the words and thorough analysis Kevin. Absolutely, it's more about getting a sense of whether valuation makes sense but from a broad perspective. I'm still making my mind about everything, but wanted to put the focus on another part of valuation, this neglected component, which I found very curious.
Just a warning, soon after you will despise everything that involves investment banking, sell-side equity research, consulting etc.
Hi Giuliano, I suggest you to take Aswath Damodaran courses (both Corporate Finance and Valution). And digest each session slowly (26 sessions per class). You find the recordings on YouTube. They are of immensely value imo. You could potentially write an article for each statement/atypical take.
Check his website for the classes (for slides, cases, data, etc). And if you would need my notes pdf, just let me know so that I send them privately.
Hello Edoardo, thank you very much for the recommendation! I partially went over Damodaran's work in school (did my undergrad in pure finance). In any case, his writings and classes are a big pending for me. I suppose I'll eventually go over them, but I have too many things to read hahaha.
I love the warning, though it doesn't matter. I try to read everything. Thank you very much my friend and will be in touch for the notes!