Discounted Cash Flow

DCF is the only valuation method grounded in first principles rather than in what other companies happen to trade at, which is both its strength and its trap: it produces a precise number from assumptions that cannot be precise. Typically 60% to 80% of the computed value sits in the terminal value, meaning most of the answer comes from a growth rate applied beyond the forecast horizon. Small changes in the discount rate or terminal growth swing the answer enormously, so a sensitivity table is not optional. Used honestly, DCF is best for understanding what the current price implies rather than for producing a target.