DCF Analysis: Conclusion
AAA
  1. DCF Analysis: Introduction
  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
DCF Analysis: Conclusion

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.


  1. DCF Analysis: Introduction
  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
DCF Analysis: Conclusion
RELATED TERMS
  1. Book Value Reduction

    Reducing the value at which an asset is carried on the books ...
  2. Appraised Equity Capital

    The excess of the market value of an asset over its book value. ...
  3. Asset Valuation Review (AVR)

    A process that establishes an estimate of the value of a failed ...
  4. Derived Investment Value (DIV)

    A valuation methodology used to calculate the present value of ...
  5. Deferred Tax Asset

    A deferred tax asset is an asset on a company's balance sheet ...
  6. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding ...
  1. What are the differences between dilutive securities and antidilutive securities?

    Learn how investors and accountants apply the terms "dilutive" and "antidilutive" to securities or the exercise of security ...
  2. How much should my profit margins be?

    Understand some of the major factors you need to consider before you set a target profit margin on the merchandise for your ...
  3. What are the differences between a 10-K report and a firm's own annual report?

    Understand the key differences between a corporation's own annual report and its 10-K report filed with the SEC and how investors ...
  4. What is the accounting treatment for unusual or infrequent items for IFRS and U.S. ...

    Learn to identify the unusual or infrequent items listed on an income statement prepared according to either US GAAP or IFRS ...
Related Tutorials
  1. Industry Handbook
    Investing Basics

    Industry Handbook

  2. Ratio Analysis Tutorial
    Fundamental Analysis

    Ratio Analysis Tutorial

  3. Introduction to Stock Trader Types
    Active Trading Fundamentals

    Introduction to Stock Trader Types

  4. Guide to Pairs Trading
    Trading Strategies

    Guide to Pairs Trading

  5. Automated Trading with MultiCharts
    Trading Systems & Software

    Automated Trading with MultiCharts

Trading Center