Old School Value

Discounted Cash Flow & Stock Valuation

The purpose of the Discounted Cash Flow (DCF) method is to find the sum of the future cash flow of the business and discount it back to a present value. I use the F Wall Street method of valuing a business along with some tweaks here and there to suit my tastes. The advantage of this method is that it requires the investor to think about the stock as a business and analyse its cash flow rather than earnings. The first and foremost reason a business exists is to make money where money = cash, not earnings. Since cash is what a business needs in order to maintain and grow its operations, it's only right to consider the possibility of its future cash growth rather than earnings growth.

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Free 5YR DCF Fair Value Investment Spreadsheet

Although finding great, stable companies with more than 10 years of history to examine is ideal, not all companies fall into this category. A boat load of companies fall into the category of around 5 years of operational history. This modified spreadsheet calculates the intrinsic value based on the last 5 years and I'll also take you through the steps to modify the spreadsheet yourself so that you can apply it to other databases other than Morningstar.

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