A valuation method that discounts projected future cash flows back to present value.
DCF requires forecasting cash flows (often 5-10 years), terminal value, and a discount rate (typically WACC). Highly sensitive to assumptions — small changes in growth or discount rates cause large valuation swings. Best used as a sanity check alongside relative valuation methods.
A valuation method that discounts projected future cash flows back to present value. DCF requires forecasting cash flows (often 5-10 years), terminal value, and a discount rate (typically WACC). Highly sensitive to assumptions — small changes in growth or discount rates cause large valuation swings. Best used as a sanity check alongside relative valuation methods.
In valuation, DCF (Discounted Cash Flow) is one of the building blocks investors use to compare opportunities and assess risk. Understanding it helps you read research notes, earnings reports, and market commentary without getting lost in jargon.
DCF requires forecasting cash flows (often 5-10 years), terminal value, and a discount rate (typically WACC). Highly sensitive to assumptions — small changes in growth or discount rates cause large valuation swings.
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