Built a desktop valuation app (DCF / DDM / reverse DCF) so I'd stop rebuilding Excel models for every pitch — would value some ER feedback

Your tool sounds like a thoughtful and practical solution for streamlining valuation workflows, especially for those in equity research (ER) or preparing stock pitches. Based on the most helpful WSO content, here are some points of feedback and considerations for your methodology:

1. Probability-Weighted DCF

• Strengths: This approach aligns well with how some professionals in equity research and venture capital handle uncertainty. By blending bull, base, and bear cases with assigned probabilities, you're effectively capturing a range of outcomes rather than relying on a single deterministic forecast. This is particularly useful for industries with high volatility or uncertain growth trajectories, like biotech or tech startups.
• Considerations: Ensure that the probabilities assigned to each scenario are transparent and adjustable. Users should be able to justify their weighting based on qualitative and quantitative factors. Additionally, you might want to include a sensitivity analysis feature to show how changes in probabilities impact the valuation.

2. Reverse DCF

• Strengths: Reverse DCF is a powerful tool for understanding market expectations embedded in the current stock price. It forces users to think critically about whether those implied growth rates or margins are realistic.
• Considerations: Make sure the reverse DCF accounts for nuances like changes in capital structure over time or varying discount rates. Also, providing a visual representation of the implied growth rate versus historical growth rates or industry benchmarks could add significant value.

3. Dividend Discount Model (DDM)

• Strengths: Including a DDM is a smart move for financials and banks, where free cash flow models often don't work due to regulatory capital requirements and unique cash flow dynamics.
• Considerations: Ensure the DDM can handle scenarios like fluctuating payout ratios or periods of dividend suspension. Additionally, incorporating a Gordon Growth Model for terminal value calculation is standard, but you might want to allow users to toggle between different terminal value approaches.

4. WACC Builder

• Strengths: A WACC builder with CAPM, after-tax cost of debt, and target D/E is essential for robust valuation. It’s great that you’re forcing users to input assumptions manually, as this encourages critical thinking.
• Considerations: Offer guidance or benchmarks for inputs like equity risk premiums, beta, and cost of debt. Many users, especially those newer to valuation, struggle with these assumptions. Including a sensitivity analysis for WACC would also be helpful, as small changes in discount rates can significantly impact valuation.

5. Terminal Value

• Strengths: Terminal value is often the largest component of a DCF, so getting this right is crucial. If you’re using a perpetuity growth model, ensure users can input a range of growth rates and see the impact on valuation.
• Considerations: You might want to include an option for an exit multiple approach as an alternative to the perpetuity growth model. This is particularly useful for industries where long-term growth rates are hard to estimate.

6. Manual Input Design

• Strengths: By requiring manual input, you’re encouraging users to think critically about their assumptions, which is a key skill in valuation.
• Considerations: While avoiding live data integration is intentional, consider allowing users to import historical financials from a CSV or Excel file. This could save time without compromising the reasoning process.

7. Export and Presentation

• Strengths: One-click PDF export is a fantastic feature for users preparing stock pitches or interview materials. Clean, professional outputs can make a big difference in these settings.
• Considerations: Ensure the exported models are customizable in terms of layout and branding. Users might want to add their own logos or adjust formatting for specific audiences.

8. General Feedback

• Pricing: €9.99/month seems reasonable for the functionality offered, especially with the trial period. However, consider offering a discounted annual plan or a one-time purchase option for users who prefer not to commit to a subscription.
• Platform Limitation: Windows-only might be a barrier for some users, especially in finance where Mac usage is common. Prioritizing Mac compatibility could expand your user base significantly.

9. Additional Features to Consider

• Scenario Analysis: Allow users to run multiple scenarios side-by-side and compare outputs visually.
• Error Checking: Include built-in checks for common modeling errors, like mismatched growth rates and discount rates or unrealistic terminal value assumptions.
• Educational Content: Embed brief explanations or tooltips for key concepts (e.g., “What is WACC?” or “How to estimate terminal growth rate?”). This could make the tool more accessible to less experienced users.

Your focus on methodology and user-driven inputs is commendable. By addressing the considerations above, you could make Aperite even more robust and user-friendly for the ER and finance community.

Sources: Biotech finance part 2: valuation methodologies and modeling considerations, A Guide on How to Navigate On-Cycle PE Recruiting, PE Associate Questions Recieved - On-cycle 2022, Flexibility of Valuation Methods in ER?, DCF Modeling Course ~ Pre-training text.pdf