How to value a company using discounted cash flow (DCF) - MoneyWeek Investment Tutorials

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.

[@Villagejonesy]

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!

[@janefromcanada6943]

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

[@timmypompom4810]

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.

[@davidtorres3333]

Can you do a real-life example with a publicly traded company?

[@seelondon100]

The explanation makes the concepts are pretty easy to understand. Very helpful.

[@awdswds1988]

This guy is freaking amazing. Superb explanation!!!

[@willi9723]

Thank you Tim. I'll apreciate if you could continue with these valuation models. You're a really nice teacher.

[@PrasenjitSarkarSingapore]

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!

[@dekass7965]

I always come back to this video.. It's been over 2 years now.. The best dcf explanation!

[@pakasunijo9370]

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

[@MoneyWeekVideos]

Yep - the result of applying DCF is to generate a net present value. Tim.

[@yusifsadik6935]

Awesome video. Wish this guy had more.

[@salgsalgglas]

Thankyou Tim. Your voice modulation is perfect for the listener to grasp the concepts you explain.

[@slavachicago99]

Interest rate of 10% sounds so extreme in 2020

[@kingofheartsxyz]

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

[@mehmetsahinozalumni5620]

%10 sounds so low when you live in Turkey

[@antonioromero878]

@@mehmetsahinozalumni5620 spot on!

[@celmasantos831]

@@kingofheartsxyz ,n

[@vj5vt]

Well nasdaq went up approx 40% in 2020 and s&p 500 about 16%.

[@bharatmittal9937]

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.

[@Thrillseeker8922]

I could listen to this guy talk about bricks and mortar all day long. The way he talks and explains things is so entrancing.

[@ranilium]

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

[@maliquepapailler]

Great introductory for me, into learning about DCF. Thanks!

[@robnugent916]

great tutorial...wish I had this back in grad school

[@malgray7396]

I find Tim an excellent Tutor .love him and his white board.usually go back over it a couple times to totally get it.

[@adamfearon672]

Great video. Thank you. (Finance major that was taught DCF in college, but never actually learned it. Until now)

[@Samil360]

Adam Fearon haha same here!

[@darkdefender6384]

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!

[@shrutipun3851]

Are

[@shrutipun3851]

Adam Fearon was my

[@mildundklar]

Excellent! You've helped me already with this superficial overview! Greetings from Germany!

[@mikenorman5172]

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

[@bernardrodrigo7121]

That’s a good directions mike investing in the market has lots of open opportunities to make cool cash.

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I’ve earned £14k trading on his portfolio account.This is truly a remarkable experience for me Maria

[@discountingrate1869]

Discounting Rate . com

[@mr.ronaldgonzales2300]

If you wanna be successful, you must take responsibility for your emotions, not place the blame on others. In addition to making you feel more guilty about your faults, pointing the finger at others will only serve to increase your sense of personal accountability. There's always a risk in every investment, yet people still invest and succeed. You must look outward if you wanna be successful in life

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[@joshuamanampiu6489]

Thanks for this simplification of the DCF Model. Yes there is demand for more.

[@fatemeazizi1863]

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/

[@rezakhoyi9438]

Fantastic teaching method employed by this brilliant teacher-Bravo

[@narijodeco6869]

Sir, you are such a good teacher. Thanks!

[@gourmayo]

Very well done video. Clear and concise - great teacher

[@barryboots9369]

Great Video! Keep it comin!!!

[@wonglihoong5298]

Barry Bootz h

[@tinnguyen2219]

Thank you so much for sharing this useful data! Greatly appreciated..

[@roynotintown]

Your lectures have played a predominant role in clearing my professional exam. it has enhanced my understanding about the subject :) thanks a lot:)

[@rowanellis8259]

Incredible teaching! Thank you!

[@amitd1572]

Brilliant Video to educate the masses. Appreciate.

[@jahmiahguillory8711]

Great intro video. Just finished my MBA and needed a quick refresher as I evaluate a business

[@blackamericanlesbianprofes4357]

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.

[@tschmiedeke9291]

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!

[@Fernandolunatoro1]

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.

[@Villagejonesy]

Todd, I think that is a good idea as well.

[@imlkr_]

It's been 7 years... How you doing mate?

[@lalthlamuangidarlong-if2nb]

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[@maxmudbekmurodov6938]

the best explanation i saw) thanks from Uzbekistan

[@ITSophy]

Helped more than my text book, great tutorial, actually understand now!

[@johnbandah2639]

let me cry first for failing my last exam 😭😭😭 finally I understand these the DCF. thanks for the great video

[@TheExceptionalState]

Great stuff. Thanks for the clarity

[@cuihe6992]

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!

[@Carrandas]

Great video, makes it easy to understand!

[@connorchristopher4917]

These videos are more helpful than my corporate finance lectures at uni

[@jenifferhall6868]

Marvelous video...Tim. Im looking forward to see the more details part of DCF.

[@D4rkenedskies]

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...

[@ely2732]

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.

[@alireza2295]

Terminal value and the impact of interest rate well explianed. Thank you!

[@emmanuelowolabi12]

You're a great teacher. Enjoyed this lecture! 👍

[@davidstevens3934]

Such a pleasant surprise to get a trustworthy British accent on a financial explanation video 😂

[@HeldEd]

This was such a great explanation, great video!

[@caeila808]

i despaired of ever understanding DCF analysis but this gave me a toehold!

[@darylallen2485]

I find your videos reek of competence sir. Well done.

[@michaelmidzio1472]

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.

[@dereka8041]

Glad I kept my Finance 530 book. I use it as a reference, from time to time.

[@fatemeazizi1863]

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/

[@michalk7777]

I absolutelly love it! Thanks

[@lunamorris2091]

Thank you a lot for this video. This is very interesting and informative. Keep posting like those amazing videos, this is awesome.

[@imicca]

love the British English! Always feels like the accent that any good teacher should use haha

[@rajivvash8120]

Indeed - great video very well explained.

[@brijin143]

Thanks Tim for the video

[@TheHumanSpirit]

Excellent presentation. *Thank you.* Your presentation skills (e.g., cadence, calm, clarity, knowledge, ability to simplify, ability to foresee questions) = 💯 across the board. *Subscribing*

[@kripalata4367]

thank you so much , this video is very useful for me

[@adambanerjee8037]

Excellently summed up! 👏🏻

[@MAGHFOOR]

Thanks so helpful:)

[@zikapavlovic8729]

Well explained! Thank you Tim!

[@PapaPev]

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.

[@ThePrateek1989]

Thank you. Nicely put.

[@williammazzacca8136]

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.

[@gabrieldurantis3159]

Great video Tim

[@shalvsakhare2978]

Thank you for the great lesson! Keep it up.

[@borsenchannel8945]

Really very well explained. Thanks

[@lukemcdonald674]

Terrific video.. thank you.

[@evanwilliamson3602]

This dude's voice is so calm, I'm going to put his videos on to get to sleep haha.

[@craigwalker6572]

Very useful and well explained, thank you

[@jacobezomo4835]

Great Video! Can you do a further video with more detailed explanation of a DCF.

[@TheJumarel1]

hello Tim, could you explain me if there is any relation between the goodwill vs DCF, or goodwill vs cash flow account? thank you

[@opeyemiokediji8069]

Amazing. Thank you so much

[@marshallhosel1247]

Thank you, was useful refresher and info.

[@ramenisgood4u]

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.

[@debashishbramha]

Just Brilliant. Thanks from India.

[@stalinnandwa4015]

helpfull work out. this guy is just brilliant

[@aaront1381]

Very nice video. Wished I found this earlier

[@jamala235]

thank you Tim

[@dereka8041]

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.

[@samddouglass]

Hi Tim, thanks for the videos they are great. Would it be possible to get a video on making forecasts for revenue etc. themselves?

[@kimdals]

I would love to see a video about EVA ! :)

[@BladeBoques]

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.

[@ValerieAbena]

Thank you so much! After some time stressing I finally find a video that explains it in a way I can understand 🤗

[@oakinvestment5371]

I now know as much about how to value a company using DCF as I knew 10min 49sec ago..

[@luisborges2048]

This is a greatly explained video.

[@morisot]

Hi Tim, great video. Just wonder can DCF model be applied in assessing REIT?

[@boratsmagadijev940]

Great work!

[@TheCapitalismking]

you sir are a rock star thank you for all your helpful videos

[@darkdefender6384]

Great video man. Anymore you wish to teach on this subject I am sure all of us out here in KZbin land would love to watch it📈👍

[@ab5526]

Which calculation for the value of intrinsic value is most accurate: 1) DCF(earnings based), 2) DCF (FCF based), 3) projected FCF. Thank you.

[@Sam-zx4rp]

Do em all and take the mean value 🤔🤔

[@SilvinaLisboa]

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

[@hashemeshanouq7351]

well done mate.

[@realdeal3262]

Great lesson Tim bravo

[@justinrrizzo]

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?)

[@rizywizy]

excellent explanation

[@DewTime]

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!

[@sameester]

Thanks, would love to watch a follow up!