Glossary
Discounted cash flow (DCF)
Valuing a company as the present value of the cash it is forecast to generate.
A DCF forecasts free cash flow for a period, typically five to ten years, adds a terminal value for the years beyond, and discounts both back at a rate that reflects the risk of those cash flows, usually the WACC.
It is the most assumption-heavy method. Small changes in growth, margin, discount rate or terminal value move the answer a long way, so the output is best read as a range with its sensitivities shown.
In Hebrides
The Valuation Suite runs a DCF alongside the other methods that suit the company, and lays out the arithmetic step by step.
Valuation Suite