The DCF Model Explained - How The Pros Value Stocks/Businesses

[@ThePlainBagel]

Happy Friday everyone! If you'd like to try out Blinkist, head over to www.blinkist.com/theplainbagel to get unlimited access for 1 week to try it out. You'll also get 25% off if you want the full membership.

[@vidhitnaik2386]

Thank you so much for your content!! Yours and Patrick’s channel among a few others inspired me to register for my CFA. I’m currently sitting my CFA level 1 in feb! - ps I’m an engineering student lol so no finance background. I just seem to love it thanks to channels like yours! 😌

[@eliteffsquadron9932]

Pls make a detailed video on how to get a stocks value

[@andrewtaylor3030]

📌Thanks for the video,investment is the key,you can be rich like these millionaires by working your ass out,most of them don’t work upto 3hrs everyday.They earn passively from their investments which most minimum wage earners don’t do,life is sweet when you have different sources of income,invest in something to expand your earning

[@fuhat1040]

There is guy trying to be you.

[@larsvandorp1298]

Some examples would be great since I am not sure about the once I made

[@radumurzea6112]

I’ve been following your channel for a very long time (almost 2 years I think), it’s the first comment I ever leave here. And I do it only to say this: PLEASE make another video with a full example of applying DCF. It doesn’t matter if it ends up being 1 hour long, I would absolutely watch it multiple times in order to fully grasp DCF (which can be quite complicated). Thank you.

[@bmadoub1729]

uitate la lectile lu martin shkreli de investing, intra in detaliu

[@healerghost]

+1

[@SpencerGD]

Nah, dude. You left a comment 5 months ago, but imma let it slide.

[@radumurzea6112]

@@SpencerGD I must’ve forgotten :))

[@SebastianLopez-nh1rr]

Agree!!

[@SalchichaStudios]

Please go super in depth in a part 2. Love what you do man

[@TheLadyFool]

Boy, I wish I'd had this video during my finance class - I recognized most of the components, but having you break the algebra into pieces and reminding us what it actually represents was extremely helpful!

[@theMixElite]

I was literally 1 hour before this video went out, trying to find out good explanation of DCF. Wow.

[@ammt1999]

One of the best videos you ever made! Make more videos like this teaching how to apply theory while adding details about what's industry standards and your own experience, really useful!

[@sheefo6217]

learned this ad nauseam in university 6 years ago, and it all looks clean and scientific but then once they make you do it yourself and you go through it you realize just how subjective it really is. Finicking a tiny bit with your growth rates and wacc can essentially make any stock a buy or sell, and once I got access to a bloomberg terminal you can see that kind of playing out with analyst predictions. It can really get whacky when you are valuing companies that are not profitable yet, and some unique industries like gold mining that have a negative terminal growth rate, or crypto and tech where you can't really quantify how impactful the product will be and thus how exponential their growth will be. It just added another notch to index investing in my book over trying to stock pick.

[@perzonne6302]

lol sounds useless then

[@victorgbs]

@@perzonne6302 like most attempts at stock picking, even if trying to be rational about it. Join the Bogleheads instead! One of us! One of us!

[@OopsFailedArt]

@@perzonne6302 for most of us yes. There are extremely talented people who are very good at making the right assumptions. Problem is, and this will shock you, they tend to not reveal their research. I have had the pleasure of knowing someone that was truly gifted here but the amount of research she put in for a single stock was mind blowing. As a result, she normally held no more than 5 companies which would be in advisable for anyone without her skill level

[@poisonpotato1]

Can always use the tried and true engineer's method of applying a safety factor to round off assumptions

[@sadikinjeryon9082]

One most important prequisite to use DCF model in stock valuation is: the stability and consistency of company growth. If the company doesn't have those things, DCF is useless. Also, use it only for 3 years forward estimate, no longer than that. Predicting the not-so-far future of economy, industry and company performance is not easy job (because we never know exactly what will happen in the future), and it will be far more difficult if we try to predict longer timeframe (more than 3 years ahead).

[@massdestroyer5134]

This was amazing. I’m a finance and accounting major and a deeper dive into the dcf would be awesome. The way you explained it made it easy to grasp. Love the vids

[@thelawenforcerhd9654]

You do understand that if you add a single random variable to the analysis it is COMPLETELY WORTHLESS? Just throwing that out there. Sorry to interrupt your fanboying.

[@waveril5167]

Then don't put random numbers in it. Investors have used this method for years and it helps. If you put random numbers in it, you can just guess. @@thelawenforcerhd9654

[@Hyperpandas]

There is an interest in you going through a step by step example and maybe diving into the details (1:40). Signed, probably everyone who watches your videos. 😀 PS: Only if you want to. This video is great as it is too.

[@ASult-qr5ib]

I'd love to see more details! I actually would love to see an example where calculations are done step by step to see how the value of a company is estimated, even if the company is fictitious like the example here. great video as usual!

[@seventoejoe3307]

Second this! It's very difficult finding an understandable DCF instruction on the web. I read through the article on investopedia and was still like... Uhh what did I just read again? This is much more clear cut.

[@cedricdellafaille1361]

third on this! the explanation is really well done but i need some examples to fully understand

[@gabriel_wedman]

fourth on this!

[@shreyanpurwar1085]

This is probably the best video regarding DCF I have ever seen. Beautifully explained. But like the other comments, it would be amazing if you could do a video applying the DCF model to an actual company, referencing the concepts you made in this video to help clear some minor confusions.

[@midimusicforever]

Going through the details could definitely be interesting, but it would be even more interesting to see you discuss how to actually do those estimates well. That's the important part.

[@danielcarvalhobica630]

You perfectly summarised in a clear way half of a master course I'm taking... wow

[@davidwalsh9807]

Yes please Richard, I would love to see a run through- that would be super interesting

[@adrumwhisperer]

you just clearly and concisely summarized 2 quarters of college investing/corporate finance courses in under 15min. Good job, Mr. Bagel! Best video, yet!

[@David.Marquez]

I think It's great how a lot of investors have their own variations and principles on how they do DCF, great to see a Plain Bagel video on it!

[@InvestorCenter]

Great to see someone on KZbin teaching fundamentals on investing

[@Windschutzscheibe]

You've explained in under 15 minutes what my professors couldn't under a whole semester. Much appreciated. It's easy to get lost in the small complex steps of calculating the estimates, and by the end you don't even remember why you are doing this in the first place. The typical example of the tree and the forest. It's also worrying how this pattern is recurrant in my other subjects as well, where almost no emphasis is placed on the purpose of things, but the theory and technical background is overemphasized, and the technical part is what's asked almost exclusively in the exams as well...

[@ricseeds4835]

I don't know if he already did but this definitely requires a hands-on step-by-step example for a real company using their financial statements.

[@petterromano3686]

Definitely do more videos like this. Especially as a finance and accounting major, I’d love to see more

[@ignazlangeslagvanasselen4940]

your voice is amazing to listen to I wouldn't mind a 1 hour long video further delving into the dcf model or other ways to value a company

[@Marque734]

That's a very clear explanation. Some are very mechanical do this, do that and never explain why. Then I read Pr. Damodaran papers that explain in detail why you use this value and that value but don't explain how you actually do it. You hit the golden middle, thanks!

[@kayak2hell]

Thanks for appreciating that your audience has different levels of education, understanding, and interest in personal finance. Kudos for breaking down a more technical subject in a way that doesn't alienate any segment of your audience.

[@dmitriytimchuk771]

This vid went out almost the exact time I started thinking of finding a good educational material on calculating a stock price, sometimes I feel like I live in the matrix

[@chazigo3106]

Please Please Please! Make a thorough explanation video of a DCF. I love the way you break things down and that video would SERIOUSLY help me! Much love.

[@dfresh2989]

Nice job! I just learned all this in a masters level securities valuation class. We went through a lot of detail into each of these, but you made it really simple and easy to understand. Thanks

[@richardpyo4426]

Nice video Richard. Would love to see these more advanced financial concepts in the future too!

[@robertwright8844]

Yes, I'd love to see a full example worked in detail. Thanks for the video!

[@vivekmenon4118]

Thanks for the video. A very easy to understand step by step introduction & walkthrough of DCF.

[@maxmassetti2392]

Analyst: *does DCF* Analyst: *comes to the same realisation that everything in the market is overvalued*

[@Jr2728]

Damn right😂🤣😂🤣

[@tiendoan1333]

So underrated

[@Marque734]

maybe your analyst uses a too high RRR or looks at the wrong stocks

[@ardendba]

Low interest rate could be the reason the required return from stock market is much lower than before since 10 years treasury yield is only like 1.7% As long as your return from marketable security is higher than 1.7%, the investment makes sense. your only opportunity cost would be missing out other securities which provide higher returns

[@Jr2728]

@@ardendba but nobody wants higher interest rates

[@jaypunekar590]

A detailed explaination of DCF model would be really helpful. Please make a second video. BTW, Love your content! Keep it up!

[@drek273]

aswath damodaran

[@karlhoffam3630]

Hello

[@sanchitcop19]

The most important thing I've learnt from this video as that I don't care about evaluating individual stocks as much as I thought I did and should probably stick to ETFs

[@yeehaw5741]

holy hell, someone else made a dcf video just a couple hours before yours, and i was like "damn cant wait till The plain bagel comes up with a video about dcf" and you read my mind !

[@Eveningredening]

I want to express my interest in that more detailed second video. Much love to you, bagel.

[@ZKaiLe]

Definitely the best explaination of DCF all over the tube

[@JackDuffley]

No, Richard. Everyone knows that valuing stocks is best done by communicating with the moon gods and asking them where the rocket ship should land 🚀🌕

[@ThePlainBagel]

Don't worry, I cover that in the next piece, "Shamanistic rituals and sacrificial practices for getting gains,"

[@johnterry5954]

@@ThePlainBagel I’ll be eagerly waiting for this ☝️

[@karlhoffam3630]

Hi John

[@andyvasist418]

Hi karl

[@investinglens]

Discounted Cash flow model is a must know for any investor, Love the in depth video format!

[@Fir3Chi3f]

This is so much more complicated that I anticipated

[@graemepederson4661]

Hey, this will be my first comment on your channel. I love your stuff and the more complicated topics you explain really well. It sets you apart from other channels in finance and i would absolutely love to see more like this from you in the future. Great video and thanks for making all of these.

[@selwynparker5793]

A lot to take in even after studying this stuff over 22 years ago. A great helpful refresher. I would like more on valuation of assests/equities.

[@YuriZhylyuk]

Thank you for another interesting video. Walk through of DCF calculation using financial reports from some publicly available data source (like yahoo finance, etc.) would be greatly appreciated.

[@danienishanov738]

A second video with a full example is crucial, practice is everything, love your channel and in any case thank you for this video

[@heshanpalliyaguruge6333]

PLEASE DO STEP BY STEP SIR. As a young finance nerd, I am very keen. I take lots of inspiration from you and Dr. Damodaran

[@MyFinancialFocus]

Everyone knows the only real way to value a business is by measuring how many short sellers are shorting the stock and then going to Wall Street bets to hype it up so it can be short squeezed.

[@davidhunter1429]

lmao, I laughed so hard.

[@selwynparker5793]

I am guessing You must be very young in the world of finance.

[@karlhoffam3630]

Hello Mr. Parker

[@karlhoffam3630]

I really wish to chat with you privately , you seems and sound learned and educated . Can I get a guide from you ..?

[@Adrik808]

@@selwynparker5793 I'm guessing you can't spot sarcasm

[@giuseppeo77]

Great video Richard! Yes! Please bring on the example video. Keep up the good work and thank you!

[@tomhayward1306]

I would like to see a step-by-step DCF example. Thanks for the video, this one was very helpful :)

[@vladpruna95]

Hey Richard, I'm still waiting and hoping for a more in depth guide/example of the DCF model, it would be very helpful and much appreciated. Please keep up the good work, your channel is great!

[@howardhuynh2336]

Great video! I think the video going through an example would be great

[@johneberle5814]

This is exactly what I needed and I would love a deeper dive in a second video!

[@cedricdellafaille1361]

my dear lord my head is blown i wonder how many times i need to rewatch the video to fully comprehend it all into detail

[@MrMineHeads.]

Loved this video and I want to see more on this topic! There's also the Five Factor Model for determining return to equity, but Ben Felix can explain that 😉

[@finnschroder2499]

I had to do a DCF Valuation for a university project last week😅 This video would’ve been enormously helpful 😩

[@triple_gem_shining]

Your channel is amazing. Technical knowledge presented concisely and clearly. Thank you!!!

[@Jay-tv8nk]

It would be great for you to do a bit of a series on the different parts of DCF! I would 100% watch that.

[@MountainFinance]

Great video. I think a lot of your audience will really appreciate a glimpse into the DCF.

[@richardye9805]

Thanks for the video Richard, I loved it. I would also like to see a more detailed example!

[@tomaszvinys2389]

Hi, Richard! Thank you for a great video. Indeed you have a lot of experience and you're able to explain these formulas in a way that's entertaining and understandable. I'm definitely waiting for more such series. Oh, and yes - a real world example would make such explanations totally perfect :)

[@eeerish]

Great one Richard! Would love to see a more in depth drill down of the model with an example, would be very helpfull. Thanks!

[@neilcampbell5963]

Yes 2nd more in depth video please this was absolutely superb!

[@d_15745]

Yes! We need a more in-depth DCF vid please!

[@feripnooi]

This video made me realize just how outrageous those investment Ti kT oks and internet gurus really are when they talk about investment being easy. It really is a highly-technical job with years of experience required and not something you can do by finding silly "patterns" on a graph in your bedroom. Thank you Bagel, for opening my eyes.

[@percevalzinzin5983]

Nice vid again! Best method to evaluate Plain Bagel: Discounted Cash... Flour :-)

[@JustinRothberg]

Yes. Step by step please. Been trying to figure this out for quite awhile and always get lost somewhere.

[@AlistairAllison]

Ive tried numerous strageties and this is by far the best if keeping in mind candlestick patterns trends etc. Winning 80% of my trades .🕶

[@joaopedrorocha5693]

i didn't finished watching the video ... but yes, give us the glorious details!

[@FinancialShinanigan]

More helpful than the finance course I paid thousands of $ for

[@carlaboujawdeh]

love you videos and yes PLEASE make another video with a full example of applying DCF

[@juselara02]

The plain bagel called me a pro 😍. Amazing explanation!

[@miguelmedero3701]

@The Plain Bagel: great video Richard 👍. Good didactic and entertaining videos always. Definitely, a second video on this subject please !! 🙏

[@burrisewell2227]

Absolutely do the example for the DCF!!!

[@Tzannisss]

I think everyone wants to see that second more in-depth video, including me!

[@travelchimps6637]

Another video on this topic with an actual stock would be amazing. 🤩

[@MrGadhikari]

Richard, you should put together a book with all these topics you cover. I'd buy it.

[@nucreation4484]

After all the work that you put in with valuing and taking time researching, about how frequently are you able to find something that you're seriously starting to consider investing in?

[@neeleshj8059]

Hey can you please make an explainer about defi. The content online seems to be all over the place.

[@virulabeygunawardane5428]

Loved the video! Would be great to see an in-depth analysis of the DCF model in your future videos!

[@400ccSpeed]

This was an awesome vid! Hope to see you go more in depth sometime

[@mark.p9824]

Yes, we do want a deep dive into the DCF model :-)

[@bmoreno-ri8]

Yes I definitely want a step by step videoooo going deeper

[@xuanxiang4904]

So far the most hardcore video of the series,my mind just flew away😅

[@cirodirosa6752]

Thank you! Please go through an example! I think Tesla would be a striking example.

[@applefav101]

Just started the video, but I'm super grateful you're covering something a little more complicated!

[@SuperJohnep]

Thank you for making this video even though my eyes began to cross about halfway through 😂

[@SebastianLopez-nh1rr]

I’m interested in an example! 👏🏻

[@bharatbheesetti1920]

Love this video! You should definitely dive a little deeper into the process and maybe run out a possible dcf valuation of any public company. That would be awesome. Keep up the good work!

[@Axel-xj8rl]

Please make a follow-up! Appreciate this vid so much.

[@martijnbrulezz]

Would like to see the step by step case analysis! 👍

[@Roarpian]

Excellent work! I look forward to an example video

[@chuksajeh1813]

As someone that wants to get into investing, would you just use this, or would there be other factors to consider when looking into a company?

[@andrewsharpe7630]

If you are new to investing then the DCF forumula is likely the last factor you'd want to look at. Too complex and far too many changeable assumptions for a newbie. Learn the basic ratios (P/E, P/S, P/FCF, etc.), learn how to read income statements and balance sheets, pay attention to the earnings reports of companies you want to invest in, with attention given to "guidance" (how much a company believes they will earn/ grow their business in the future) etc.

[@chuksajeh1813]

@@andrewsharpe7630 appreciate it thank you man! 🙏🏾

[@Dfm_Sushil]

Can we use this method for banking stock analysis????

[@ThunderGodJX]

detailed dcf would be much appriciated

[@floxy20]

I didn't realize such economic modelling was so creative. Speculation meets Magical Thinking. As a retail investor I'll (profitably) stick to dividend yield, i.e. how much does the company make for ME.

[@Bantobror]

Yes! But at the same time it can be nice to see that the company makes alot of money excluding the yields, that money can be used for acquiring other companies or investing into production, etc :)

[@floxy20]

@@Bantobror That's for people with bags of money who may have more sophisticated maneuvers in mind than my humble retail investor outlook.

[@drek273]

@@floxy20 wow your self deprecation is oscar worthy

[@Roan-xj1mg]

Yes, please do a second one

[@pradanal.m.r.8276]

Hi Richard, how about help us to run through how fund manager use DCF, in conjuction with other analysist? Therefore we can get a whole picture of how the fund manager determine the 'worthyness' of a company. Because just DCF alone, I think anyone here who motivated enough, could find it on internet

[@graemepederson4661]

Please make a video about finding market value of debt too!

[@romansokolovskii6941]

Thank you for a great explanation! There's something I don't get: why does the stock market grow over the long run in real terms? Why aren't the factors contributing to that (say, productivity growth) just priced in?

[@justinbeghly1435]

Really great explanation

[@calumshaw2716]

Great video! Would love to see the full version

[@emquh4074]

God I love this channel! Commenting to add to a shared excitement for your follow up video

[@hectorbetancourt2854]

A step by step would be great! Nice vid my guy