Should (in theory) EV/CFFO imply the same price as P/CFFO?
In my 3 year DCF as the exit multiple I have EV/[forward 3-year consensus CFFO]. Then through the conventional "+cash-debt and etc" I got to the implied share price.
Then instead of DCF I tried to check out what P/CFFO will show me, as in taking P/[3-year forward consensus CFFO] and multiplying that number by my estimated CFFO in 3 years (the same CFFO that I used in my DCF exit year)
Here is what confuses me the most, the P/CFFO gives me twice the share price than DCF.
My question is whether this is just how the spread between Price and EV multiples works, or there is something substantially wrong with my model.
Thanks a lot guys, I really appreciate all your efforts.
If you're just taking a consensus fwd operating cash flow multiple for that company, why not just directly compare you're projections for cash flow and see if they are lower of higher than the consensus? Either way, you're not expecting different multiples to give you the same share price are you?
Also, your estimate for "cash-flow" needs to match what you're trying to value. If you're valuing EV, use an unlevered cash flow metric like EBITDA. If you want to value equity value, use FCF. You're mixing and matching.
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