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A better way to judge valuation: ignore DCFs
Coming out with Price Targets via direct DCFs is a sure way of being wrong. I prefer to...

1) Build an inverse DCF to find out what FCF growth is embedded in the current stock price

2) Understand what needs to happen to achieve that FCF growth (hundreds of possibilities here but probably few make sense for that business in particular)

3) Judge wether the things that need to happen are reasonable or not (need to know the company well to judge this)

Leandro's avatar
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