When you run a DCF, you're taking all future free cash flows and discounting it to today. So essentially, that's the intrinsic value of the company at the present. If you're looking for the 1-year TP, would you discount the free cash flows back but only up to the period one year from the present?
Trending Content - Equity Research Forum
Career Resources
What does TP stand for?
Do you mean terminal value?
I think by TP he maybe means target price? It's usually written as PT though, "price target".
If so: No, discount back to present-day. The 1-year price target is taking into consideration assumptions on forward-looking catalysts that drive the thesis of the argument supporting the PT.
Technically you can discount back to one year from now to get the 1-year price target. Think about it. You have your assumptions which give you free CFs for the next t years and a terminal value. You get the present value by discount everything back to today. Then, why should it be different if you want a value one year from now. My 2 cents.
Theoretically, you discount it to today and then x cost of equity to get the target price 1 year out; in practice you should just discount it to today.
Why the difference in theory and practice?
Dolor suscipit nulla accusantium placeat vel hic. Eum non molestiae sit cumque voluptas minus aliquam.
Id modi omnis ut id odit facere. Iste distinctio repudiandae dolor unde corporis corrupti doloribus. Ut non praesentium nisi temporibus veritatis impedit dolores.
Odio quia maxime dolorem aut veritatis provident. Rerum totam doloremque totam commodi. Illum dignissimos necessitatibus laborum.
Quidem est reprehenderit quis ullam deleniti aut. Est nisi aut suscipit ea. Eius et deserunt dolores voluptatem ipsa. Sint voluptatem laboriosam impedit autem laborum. Nulla dolorum voluptatem amet recusandae.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...