James Montier Looks at the Flaws of DCF Models
- Posted by Ivanhoff
- on July 11th, 2010
In this paper, James Montier points out the absurdity of using the Discount Cash Flows model to value financial assets. Our empirically proven inability to forecast cash flows far into the future and the extreme difficulty of defining a proper discount rate substantially limit the usefulness of the model. The author points out three alternative methods as a way to measure value. The paper is well worth the read in its entirety, but here is a quick summary of the main points:
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My name is Ivan Hoff. I am a stock trader. I manage Stocktwits 50, Stocktwits Email and was featured in The Stocktwits Edge, which I edited. (More) -
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