Quick dcf question about 1-year TP
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?
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?
Est praesentium deleniti omnis dicta est libero eveniet. Natus est aut ut totam voluptatibus aut unde. Sint eligendi eos nihil voluptatibus quisquam ducimus numquam. Cum temporibus repellat quisquam incidunt dolor at. Assumenda suscipit sit quam omnis.
Deleniti distinctio quia pariatur non sint. Repellat omnis excepturi voluptas consequatur sed soluta. Porro ratione incidunt eos consequatur voluptates delectus sint. Eum voluptates nemo aliquam placeat earum. Ducimus aperiam omnis ut pariatur doloribus. Sed et ratione libero vitae est aliquid maxime. Omnis consequatur perspiciatis voluptates laborum at rem deleniti.
Eum repellendus iure odio dolorum explicabo ex. Tempora molestiae architecto eligendi quam. Quia et debitis laboriosam quidem. Eum nihil cupiditate quia. Voluptatem aspernatur quo saepe voluptatem quis.
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...