Had a networking call with a senior analyst at a very reputable LO. After I shared a pitch with him for feedback using a DCF, P/E EPS, and EV/EBITDA multiples analysis, he said “You will learn brand new ways to value a business” and told me that he wouldn’t really use any of my valuation section if this was a real idea for consideration.
He went into a little more depth, talking about the importance of understanding how changes in specific key variables would change the profitability/EPS to the specific % or $. He kept emphasizing the phrase “rate of change” and using an analogy of calculus (this) vs linear algebra (DCF). Now, I understand this and I’ve seen it before. However, isn’t this just an extension of DCF Forecasts in the form of a specific scenario analysis?
Is there a specific name for this kind of valuation? What other valuations do analysts use as he initially referenced? Anything special taught at CBS?
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His comment is probably 60% wanting to sound smart about using some derivative of a cash flow PV and 40% something to do with valuing off key value drivers like CAC, customer LTV, etc.
More like 101% effort to sound smart. If you cut 51% out which was BS, its probably some back of the envelop valuation off some pro-rated driver of the business
Basically, he described KPI driven sensitivity analysis and maybe some elements of return decomposition (how much comes from earnings growth vs. multiple vs. dividend). Sure, we do this sort of analysis for every business we look at mostly because it's part of our spreadsheet templates and happen automatically, but it's not like you're reinventing the wheel or doing anything revolutionary. You just take the analysis half a step further and look at key return drivers that will help you distill your thesis further.
This, and probably the comment on CAC LTV before. Not sure, potentially he may be pulling the real options or Montecarlo cards. Seems he's into bs-ing you to a large extent, as none is "brand new".
What kind of DCF models u doing?? Do u even know what linear algebra is
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