How to Determine X% Upside in Y Years

If a DCF is used to find the present value of a company, that means it is supposed to be worth $Z per share today.

Is there another way to identify upside in let's say 3 years besides multiples valuation like P/E or EV/EBITDA?

 

The thought process here is that you will do your research and build out your DCF using your research-based assumptions to forecast the financials. If your thesis supported a catalyst to occur within the next 3 years, you would use your year 3 projections as your time horizon where you would have already forecasted scenario-based EPS. Therefore, as you mentioned, you assume constant P/E to calculate target price (can always adjust given any earnings surprises). You use your DCF's present value and compare it to the P/E multiple stock price to find estimate appreciation over a 3 year period. 

I wanted to know if there is a better way of identifying a longer term price target and upside estimates for a 3-5 year time horizon. 

 

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