You make some great points. I've been using the reverse DCF for some months now and also been constantly trying to tweak and improve my valuation process.
The post contains a Google Sheets link where you can experiment with various parameters. Additionally, you can utilize the Goal Seek extension to calculate the IRR.
Thank you for the insights, IRR seems to get around at least some of the wrong assumptions of the DCF.
Great to hear that you liked it! IRR helps sidestep some of the rigid assumptions of DCF, particularly around discount rates.
You make some great points. I've been using the reverse DCF for some months now and also been constantly trying to tweak and improve my valuation process.
Great read, thank you!
Glad you enjoyed the read, and appreciate the feedback! Would love to hear how your process evolves.
This is a very persuasive article that holds a lot of value. I really may begin using this method more.
Great to hear that you liked it!
Try This:
Discounted EPS (Perpetuity, CPI, Zero Growth Model)
= Σ (t= 0 to ∞) EPS(t) ÷ (1 + k)^t
= Eps × ( 1 - ( 1÷(1+CPI) )^999999999 ) ÷ ( 1 - ( 1÷(1+CPI) ) )
or
Discounted EPS (2×ROIC, CPI, Zero Growth Model)
= Σ (t= 0 to 2×Roic) EPS(t) ÷ (1 + k)^t
= Eps × ( 1 - ( 1÷(1+CPI) )^(2×roic) ) ÷ ( 1 - ( 1÷(1+CPI) ) )
or
Discounted EPS (ROIC, GDP, CPI, Zero Growth Model)
= Σ (t= 0 to Roic) EPS(t) × ( (1 + GDP)×(1 + k) )^t
= Eps × ( 1 - ( (1+GDP)÷(1+CPI) )^(roic) ) ÷ ( 1 - ( (1+GDP)÷(1+CPI) ) )
k
= CPI discount rate
Number of Perpetuity Years
= ∞ (=999999999... in calculator) without GDP
, 2 × ROIC without GDP, ROIC with GDP
This is what expectations investing states. How do u do this? On excel or?
The post contains a Google Sheets link where you can experiment with various parameters. Additionally, you can utilize the Goal Seek extension to calculate the IRR.