What are the disadvantages of using the discounted cash flow method in determining the value of a stock?

ANSWER

Expert Thomas Graham iii's Answer:

The only major disadvantage of the discounted cash flow method in determining the value of a stock is that the discounted cash flow method is subject to "garbage in, garbage out".  It is merely a mechanical valuation tool and should be noted as such.  You have to be very careful to analyze what is being input into the equation or you will get nonsensical data out of the equation.

Thomas Graham iii, CPA

Mississippi

2 yrs experience

• Currently 5.0000/5 Stars.
• 1
• 2
• 3
• 4
• 5

80 Ans.