Concept Guide
DCF: theory and mechanics
How a DCF values a business: FCFF and FCFE, building the model step by step, multi-stage models, sensitivity tables and ESOP dilution.
12 min readRead more
Valuation
DCF, relative valuation, sum-of-the-parts, and the mistakes that recur.
7 guides. Read in order, or jump to what you need.
Concept Guide
Relative valuation (P/E, EV/EBITDA, P/B, EV/sales)
Valuing a company against its peers with P/E, EV/EBITDA, P/B and EV/sales: when to use each, and why similar companies trade at different multiples.
10 min readRead more
Concept Guide
Sum-of-the-parts
How to value a conglomerate segment by segment, then allow for debt, central costs and the holding company discount without double-counting.
8 min readRead more
Concept Guide
Sector-specific valuation (banks, insurance, real estate)
Why banks, insurers, real estate, oil and gas and telecom need their own valuation metrics, and why EV/EBITDA should never be used for banks.
11 min readRead more
Concept Guide
Terminal value approaches
The two ways to estimate terminal value, Gordon growth and exit multiple, how to cross-check them, and why it dominates a DCF.
9 min readRead more
Concept Guide
Common DCF mistakes
Ten common DCF mistakes, from a terminal growth rate above WACC to stale betas and false precision, and how to avoid each one.
8 min readRead more
Concept Guide
Reverse DCF: what the price already assumes
Start from today's price and solve for the growth it needs. How to run a reverse DCF, an illustrative worked example, and how to judge whether the implied growth is realistic.
7 min readRead more