How to value a company using discounted cash flow (DCF) - MoneyWeek Investment Tutorials
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- เผยแพร่เมื่อ 4 ก.ค. 2013
- Every investor should have a basic grasp of the discounted cash flow (DCF) technique. Here, Tim Bennett introduces the concept, and explains how it can be applied to valuing a company.
I think this man is a great teacher. He explains everything in very clear language, and avoids obscurantism, yet without slowing the moving train down so much that it's at a crawl. He does well at presenting all the principles clearly, when it is easy to make someone's head swim, especially when a bit of maths are introduced. Good work!
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Can you do a real-life example with a publicly traded company?
In all my years of accounting I have never heard it explained better. You made it so easy to understand. You are an excellent teacher. Thank you for posting
let me cry first for failing my last exam 😭😭😭 finally I understand these the DCF. thanks for the great video
The explanation makes the concepts are pretty easy to understand. Very helpful.
Thank you Tim. I'll apreciate if you could continue with these valuation models. You're a really nice teacher.
Thanks for the detailed explanation. You're the first person on youtube that I've seen so far that goes into detail to give people a better understanding of the formula instead of just showing us how to plug in the numbers.
This guy is freaking amazing. Superb explanation!!!
Have watched a few of your videos and found, in each one of them (including this one), a very lucid explanation which even a layman can understand. Thank you!
I always come back to this video.. It's been over 2 years now.. The best dcf explanation!
It has been mention several time in the video, "it's basic" of course other assumptions and calculation are not mention.This guys proves that any "complicated topic" should be explainable to a kid!!!! wonderful job Tom
I could listen to this guy talk about bricks and mortar all day long. The way he talks and explains things is so entrancing.
Thankyou Tim. Your voice modulation is perfect for the listener to grasp the concepts you explain.
Yep - the result of applying DCF is to generate a net present value. Tim.
Thank you so much for explaining in detail, very helpful in understanding. I am a mature (age 35 going on 36) BSc Accounting and Finance International (Black American) student.
UPDATE some hours later: someone's comment on here is correct. I realise too (further research I have done) that Tim Bennett forgot to acknowledge the initial investment figure into the business. You then need to subtract the Total DCF from the initial investment figure to see if the answer called NPV (Net Present Value) will hopefully be positive to re-invest into the business. And this would interest the investors to want to invest in the business and earn a reasonable return.
The rest of what Tim Bennett has mentioned is valid.
Awesome video. Wish this guy had more.
Excellent! You've helped me already with this superficial overview! Greetings from Germany!
Appreciate. Very nicely presented. Easy for students to comprehend. I am also a faculty and a professional in India dealing with Business Valuation and Corporate restructuring. Enjoyed the presentation style and the Content too. Keep it up. All the best.
Great introductory for me, into learning about DCF. Thanks!
Fantastic teaching method employed by this brilliant teacher-Bravo
Such a pleasant surprise to get a trustworthy British accent on a financial explanation video 😂
Great video. Thank you.
(Finance major that was taught DCF in college, but never actually learned it. Until now)
Adam Fearon haha same here!
Adam Fearon I hear ya man. I was a business major and I wish profs explained things so straight forward. I guess if they did “too many” people would actually learn and graduate from college LOL!
Are
Adam Fearon was my
Thanks for this simplification of the DCF Model. Yes there is demand for more.
I would like to introduce you to the free online business valuation software of Ratiba . I hope it is useful for your business.
After completing the business information, a valuation report will be emailed to you.
Online valuation tools in this software are :
1. DCF Method
: retiba.com/online-valuation/discounted-cash-flows/
2. Risk Factors Summation : retiba.com/online-valuation/risk-factors-summation/
3. Multiples Method
: retiba.com/online-valuation/multiples-method/
4. Score Cards Method
: retiba.com/online-valuation/score-cards-method/
Your lectures have played a predominant role in clearing my professional exam. it has enhanced my understanding about the subject :) thanks a lot:)
Great vid, you have a very good technique to take the otherwise sonewhat complicated content and condense it into simple terms.. I got alot out of it . Thanks mate
Sir, you are such a good teacher. Thanks!
Great intro video. Just finished my MBA and needed a quick refresher as I evaluate a business
Why didn't I see you a year ago!? I failed that class, elective in my last year... Now working in m&a, I finally found you and understand... Thanks you, I'm just feeling stupid how I didn't understand it and failed the test...
great tutorial...wish I had this back in grad school
I find Tim an excellent Tutor .love him and his white board.usually go back over it a couple times to totally get it.
These videos are more helpful than my corporate finance lectures at uni
Interest rate of 10% sounds so extreme in 2020
this video is for high school kids .. a lot of the video i watched they are scared to discuss how to arrive at the discount rate and what to do if a company has a negative EBTA
%10 sounds so low when you live in Turkey
@@mehmetsahinozalumni5620 spot on!
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Well nasdaq went up approx 40% in 2020 and s&p 500 about 16%.
So well explained! Finally understand this concept at its roots
Very well done video. Clear and concise - great teacher
i despaired of ever understanding DCF analysis but this gave me a toehold!
To me this is just an introduction video on DCF mechanics, which does a good job. Discount rate (e.g. 10%) will be different per each company and will change over time. The riskier the company the higher the discount rate. And yes, DCF is built upon PV calculation. If you understand PV formula you will also understand DCF.
Helped more than my text book, great tutorial, actually understand now!
Great videos! I was scratching head revising for corporate finance exam and still couldnt get my head around the evaluation approach. You are a star!
Terminal value and the impact of interest rate well explianed. Thank you!
You're a great teacher. Enjoyed this lecture! 👍
Brilliant Video to educate the masses. Appreciate.
Incredible teaching! Thank you!
Marvelous video...Tim. Im looking forward to see the more details part of DCF.
the best explanation i saw) thanks from Uzbekistan
Thank you so much for sharing this useful data! Greatly appreciated..
Great video! I would like a more collocates video. And you could go over CAPM model as well within the more complicated DCF valuing of a company.
I find your videos reek of competence sir. Well done.
This is brilliant Tim and a good video to watch. I really want to start something new like investing in the market. For starters I have no idea
That’s a good directions mike investing in the market has lots of open opportunities to make cool cash.
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Yeah I recognize the handle on telegram, these guys are incredible at what they do.
I’ve earned £14k trading on his portfolio account.This is truly a remarkable experience for me Maria
Discounting Rate . com
Please could you do a weighted average cost of capital video? Specifically with a touch on finding component costs... Would make a good answer for the "how do you get the 10%" question.
This was such a great explanation, great video!
Great stuff. Thanks for the clarity
Glad I kept my Finance 530 book. I use it as a reference, from time to time.
I would like to introduce you to the free online business valuation software of Ratiba . I hope it is useful for your business.
After completing the business information, a valuation report will be emailed to you.
Online valuation tools in this software are :
1. DCF Method
: retiba.com/online-valuation/discounted-cash-flows/
2. Risk Factors Summation : retiba.com/online-valuation/risk-factors-summation/
3. Multiples Method
: retiba.com/online-valuation/multiples-method/
4. Score Cards Method
: retiba.com/online-valuation/score-cards-method/
Nice work Tim - would be very helpful if you could take the three valuation techniques you covered and apply them to "real-world" examples. Most of us are interested in the stock market, so how can we better use these techniques to perform valuations on the companies we are looking to invest in vs. an outright purchase?
Again, really appreciate your teaching style. Thank you!
Todd, It has very little to do with it. Just look at today's PEs. Before you go at it Fundamentally, I suggest you learn a good technical analyses. Price action is king.
Todd, I think that is a good idea as well.
It's been 7 years... How you doing mate?
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Great videos. The explanation of DCF was the best I’ve seen including the way I learned it in college. Did you or will you do a video on CAPM? Thanks for the education. It’s very helpful.
Excellent presentation. *Thank you.*
Your presentation skills (e.g., cadence, calm, clarity, knowledge, ability to simplify, ability to foresee questions) = 💯 across the board. *Subscribing*
This dude's voice is so calm, I'm going to put his videos on to get to sleep haha.
Great video, makes it easy to understand!
Just Brilliant. Thanks from India.
Great Video! Keep it comin!!!
Barry Bootz h
Thank you a lot for this video. This is very interesting and informative. Keep posting like those amazing videos, this is awesome.
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Very useful and well explained, thank you
This was really helpful! I've studied this awhile and this is the first time is really made sense. Is there a part 2 that you made somewhere along the line? Hope there was demand for it, I'd like to learn more from you on the topic of DCF.
I now know as much about how to value a company using DCF as I knew 10min 49sec ago..
Well explained! Thank you Tim!
The DCF will help you calculate the market value of company assets. Goodwill is an asset so there is that connection.
Thank you so much! After some time stressing I finally find a video that explains it in a way I can understand 🤗
I absolutelly love it! Thanks
Finance 101. Finished my M.B.A., back in 2012. We studied several business case studies, from the Harvard Business School. Maybe considering inflation would have helped too. Inflation runs around 1.8 percent.
Excellently summed up! 👏🏻
Indeed - great video very well explained.
love the British English! Always feels like the accent that any good teacher should use haha
you mentioned inflation . What about deflation? this happened with oil in the last few months. Thank you for the video!! Can you produce a video assuming deflation and how we do the same for a moment of deflation? Thank you
I immediately noticed that 90m at a rate of 10% does not add up to the original 100m. Should have rounded the 90.9 to 91.
Anyway good video!
Great Video! Can you do a further video with more detailed explanation of a DCF.
Just so I understand correctly, this valuation would no be entirely precise, since you would be actually be earning 10% on the 1st years earnings for 4 years, and 10% on the 2nd years earnings for 3 years, etc. Is that correct? (actually, wouldn't that calculation be the Internal Rate of Return?)
hello Tim, could you explain me if there is any relation between the goodwill vs DCF, or goodwill vs cash flow account?
thank you
Very nice video. Wished I found this earlier
Thanks Tim for the video
Thank you. Nicely put.
Thank you for the great lesson! Keep it up.
Thanks for another great video ! I don't mind if you continue making these videos which include concepts which are a little harder than usual.
thank you so much , this video is very useful for me
Really very well explained. Thanks
Is there a video expanding upon this concept? Also, is the NPV in a DCF analysis like saying that instead of the company being worth 500 million, its actually worth 378 million? Moreover, are the cash values for every year Free Cash Flows??
Thank you, was useful refresher and info.
Thanks, would love to watch a follow up!
Terrific video.. thank you.
For the cash flows in the more advanced sessions, I assume you will use future FCF and remove Capex portion. I think.Buffet used owner's earnings FCF, but that calc gives me a headache. So you want to set that discount rate to what you want to beat what you can get in a safer investment. Then when you find the particular stock and the intrinsic value, you want a big margin of safety! That is putting the intrinsic value against the market value. That % shld be bigger for small fish (50%) and around 25% for Industry leaders. Basically, you want to purchase at a deep discount...just like everything else you buy...but you want quality. Takes work bc many stocks will be priced at or near intrinsic value. When priced way over, time to wake up and come alive. It is quite exciting to find an edge. But first, I must study more. Best to really learn all.you can up front prior to action. It is a shame I didnt study this yrs ago, but that is ok. It is the process and journey that is satifying. The better returns is icing on the cake.
Great lesson Tim bravo
1:50 start
Best dcf teaching
Great video Tim
Is the "CF" used in the above example derived from figures reflecting in the CF Statement or is "CF" actually Nett Profit, still to be posted to the Capital Acc.
Great video man. Anymore you wish to teach on this subject I am sure all of us out here in TH-cam land would love to watch it📈👍
Amazing. Thank you so much
If you take each cash flow and divide it, shouldn't the formula written as CF (cash flow)/ (1+r)^n ?
helpfull work out. this guy is just brilliant
Good morning sir In Valuation of property for acquisition we have to value for the facts is it right to deduct for what has not been done
This is a greatly explained video.