Discounted cash flow
Also known as: DCF
A discounted cash flow, or DCF, is a way of estimating what a company is worth today based on the cash it is expected to generate in the future. It projects a company's forward several years, shrinks each year's projection down to what it would be worth if received today using a , and adds those figures together.
Most DCF models also add a , a single lump figure standing in for everything the business generates beyond the forecast years, since a company does not stop existing once the projection ends.
A DCF does not predict the future. It is a structured way of writing down assumptions, growth, margins, risk, so they can be compared against a company's current price. Two people can run the same DCF method on the same company and land on very different answers, simply because they used different assumptions.