Discounted Free Cash Flow Analysis For 2 Fundamentally Strong Mid-Cap Value Stocks [View article]
Yes, the discount rate can be more art than science. You can use the weighted average cost of capital formula, but even that isn't as exact as one would like. That's why I like a conservative rate, such as 12% for these companies. We're looking for a margin of safety, so better to play it safe with the analysis. And yes, whenever one selects a rate, it will compound and have a logarithmic effect on the calculation.
Discounted Free Cash Flow Analysis For 2 Fundamentally Strong Mid-Cap Value Stocks [View article]
I appreciate the comments on whether DCF is a good predictor of growth. Inherent in my approach to BIG and WDC is the concept that we can't simply take the last five year growth rate, and expect FCF growth at the same rate. Especially, if growth is all over the place. That's why I give several FCF growth scenarios for the future. Projecting future growth is independent of the DCF analysis, but the DCF helps with your value analysis once you decide on growth.
BillySundance puts it well. Dividends are great if a company doesn't have better things to do with its cash. But I don't ever view dividends as necessary, especially with growing small-caps.
2 Deep Value Stocks With Excellent Fundamentals [View article]
Discounted Free Cash Flow Analysis For 2 Fundamentally Strong Mid-Cap Value Stocks [View article]
Discounted Free Cash Flow Analysis For 2 Fundamentally Strong Mid-Cap Value Stocks [View article]
Discounted Free Cash Flow Analysis For 2 Fundamentally Strong Mid-Cap Value Stocks [View article]
2 Deep-Value Small Caps [View article]