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DCF Analysis
Value companies using discounted cash flow modelling.
What is DCF? The Logic of Future Value
Let’s talk about the "time machine" of valuation. If you’ve looked at a company’s past performance and its current cash flow, you have the history and the present. But to know if a stock is a bargain today, you have to predict its future.
The Forecast: Estimating Future Cash Flows
We are about to get into the heavy lifting. This is where investing stops being about reading the news and starts being about using math and logic to build your own forecast.
The Discount Rate: The Price of Waiting
Let’s talk about patience. In finance, there is a fundamental truth that often gets ignored in the noise of daily trading: Time is money.
The DCF Formula: Putting It Together
If you’ve been following along, you now know that cash is king and that stock prices are driven by expectations. You’ve looked at the income statement to see how much money they make, and you’ve looked at the balance sheet to see how strong they are.
The DCF Trap: Why Estimates Fail
We’re going to talk about one of the most powerful tools in finance, and how it can also be the most dangerous trap for the unwary investor.