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
| +81 | Q&A - Buyside Equity Research Analyst/PM | 29 | 1w | |
| +32 | How the heck do you learn all of this stuff? | 10 | 4d | |
| +28 | My experience on the sell side | 20 | 3w | |
| +24 | Clues in Financial Reporting Analysis | 7 | 6d | |
| +17 | Am i fairly compensated? | 9 | 1w | |
| +14 | Data Science to PM | 8 | 1w | |
| +14 | Heard they don’t model at Oppenheimer | 10 | 3w | |
| Equity Research at Bank vs IG, High Yield & Leveraged Loans Research at Asset Manager | 4 | 5d | ||
| +12 | ER - Remote Jobs? | 8 | 1w | |
| +11 | Who uses sell-side Strategists? Are they valuable? | 4 | 1w |
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?
Necessitatibus maxime voluptatibus rerum est aut. Omnis vero voluptatem ipsam. Dolor molestiae fugiat aut reiciendis dolores. Voluptatibus sunt doloribus delectus eum.
Enim quas nemo cum voluptatem aut voluptates. Unde ad ea debitis rerum dolorum consequuntur labore. Temporibus modi velit quam consequatur. Quia vitae amet velit.
Tenetur eligendi aut minus odio. Aut corporis veniam consequatur quae. Autem mollitia qui voluptatem qui modi dolor. Et aliquid tempore inventore officia nisi eos voluptate.
Voluptatem ea dolor nostrum vero occaecati voluptatem. Et et atque assumenda odit.
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...