The Discounted Cash Flow (DCF) method of valuing financial assets is intuitive, relatively simple, and precise, and works well for assets with predictable cash flows, including bonds, real estate investments, and asset leasing. However, when it comes to equity investing, there exists the “Hubble Telescope problem.” Curtis Jensen, the former Chief Investment Officer of Third Avenue Management, reportedly said, "DCF to us is sort of like the Hubble Telescope—you turn it a fraction of an inch and you're in different galaxy." Any small changes in growth estimates, cost of capital, and terminal growth rates in a DCF calculation can result in wildly different outcomes.
In this webinar, Rajeev Thakkar, CFA, will discuss whether it’s better to stick to the practical DCF method in valuing equity shares, or whether there is some benefit to using heuristics and other alternative valuation techniques.
This is an archived version of a live webinar that took place on 12 April 2018.