Value Investing Principles: Discounted Cash Flow Explained

This episode present a comprehensive analysis of the Discounted Cash Flow (DCF) valuation model, explaining its fundamental principles rooted in the time value of money and its use in determining a company's intrinsic value. They detail the core components of a DCF analysis, including projecting Free Cash Flows (FCF), determining the Weighted Average Cost of Capital (WACC) as the discount rate, and calculating a Terminal Value for cash flows beyond the explicit forecast period. The text applies this methodology to the top 20 S&P 500 companies under two scenarios based on historical FCF growth rates, highlighting the significant sensitivity of valuations to growth and discount rate assumptions. Ultimately, the sources emphasize that while DCF is a powerful tool for fundamental analysis and investment decisions, its results are estimates highly dependent on subjective inputs and should be used in conjunction with other methods.

Youtube: https://www.youtube.com/@TheDeepValue

Apple Podcasts: https://podcasts.apple.com/us/podcast/deep-value-investing/id1811057697

Disclaimer: This content only expresses the views of the author(s) as of the date indicated and such views are subject to change without notice. All analysis is based on publicly available sources and may be subject to revisions or differing interpretations. The content is for educational purposes only and does not constitute investment advice. Conduct your own due diligence before making investment decisions. Subscribe us on Apple Podcasts or Youtube channel: Deep Value Investing!