Valuing a Stock with the DCF Method
DCF = CF0 x SUM[(1 + g)/(1 + r)]n (for x = 0 to n)
How to Value a Stock with DCF
DCF Discount Rate
DCF Growth Rate
Margin of Safety
- A discount rate is your rate of return. Higher discount rate means you are trying to pay less for the future cash flows at the present time.
- Growth rates are the fuzziest aspect of valuing stocks and should be applied conservatively.
- Adjust numbers to remove one time events and cycles. Always consider a normal operating environment.
- Never for a big margin of safety. The best of us get it wrong as well.