1. Introduction to Discounted Cash Flow Analysis
  2. DCF Analysis: The Forecast Period & Forecasting Revenue Growth
  3. DCF Analysis: Forecasting Free Cash Flows
  4. DCF Analysis: Calculating the Discount Rate
  5. DCF Analysis: Coming Up with a Fair Value
  6. DCF Analysis: Pros & Cons of DCF
  7. DCF Analysis: Conclusion

Discounted Cash Flow analysis attempts to figure out the value of a company today, based on projections of how much money it will generate in the future. The idea is that the value of any company is equal to the sum of its future cash flows, discounted to a present value using an appropriate rate.

As an investor, DCF analysis can be a handy tool that serves as a way to confirm the fair value prices published by analysts. It requires you to consider many factors that affect a company, including future sales growth and profit margins. You’ll also have to think about the discount rate, which is influenced by the risk-free rate of interest, the company’s cost of capital and potential risks to its share prices. All of this helps you gain insight into factors that drive share price, so you’ll be able to put a more accurate price tag on the company’s stock.

Keep in mind that the technique shown in this tutorial is only one approach to performing DCF analysis. Every analyst – and every investor who tackles DCF analysis – uses a different method. Once you’ve honed your DCF analysis skills, it's a good idea to use the same methodology for each stock to ensure accurate and meaningful results.


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