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.
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.