Discounted cash flow

Discounted cash flow is the canonical first-principles valuation framework: project the free cash flows the business will produce, discount each to present value at a rate that reflects the time value of money and the riskiness of those cash flows, and sum. The output is intrinsic value — what the business is worth, independent of what the market is pricing it at today. DCF's appeal is that it forces explicit assumptions about growth, margins, reinvestment, and risk, surfacing where a thesis is fragile. Its weakness is that those assumptions compound: small changes in the terminal growth rate or discount rate produce large changes in fair value, especially when terminal value dominates the model. We mitigate this with three guardrails. First, we always present DCF outputs as ranges across explicit Cost-of-Equity (Ke) and terminal-growth scenarios, never as a single point estimate. Second, we flag terminal-value concentration above 60% of total enterprise value as a fragility signal that demands a longer explicit-forecast period. Third, we cross-check DCF against reverse-DCF (what growth does today's price imply?), peer multiples, and earnings-multiple frameworks. DCF is one of four-to-six lenses we triangulate; it is never the entire answer.