DCF
Fundamental analysisDiscounted Cash Flow — valuing a business as the present value of its projected future cash flows.
In plain terms
Its real output is a range and a set of stated assumptions, never a target price.
1678 terms
Glossary
Every term is defined twice: once the way a filing would put it, and once the way somebody would explain it to you across a table. The second one is usually the one that sticks.
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Net distributable cash flow
Market basicsAlso called: NDCF
The cash a REIT or InvIT has available to hand to unit-holders, the large majority of which the regulations require it to distribute at short intervals.
In plain terms
The reason these units pay out several times what a share does — and the reason a price chart of one omits most of what holding it produced.
Reverse DCF
Fundamental analysisTaking the market price as given and solving for the growth rate it implies.
In plain terms
Turns "what is it worth?" into "does this price require 26% growth for twelve years?" — a claim you can actually judge.
Terminal value
Fundamental analysisThe value of all cash flows beyond the explicit forecast period in a DCF.
In plain terms
Usually 60–80% of the answer, and by far the least knowable part of it.
Relative valuation
Fundamental analysisValuing a company by comparing its multiples against those of similar businesses.
In plain terms
Fast and widely used, and it cannot tell you when an entire category is mispriced. Pair it with a reverse DCF.
Sensitivity analysis
Fundamental analysisRe-running a valuation across a range of growth and discount-rate assumptions to see how far the answer moves.
In plain terms
The output is a spread rather than a figure, and the spread is the honest answer. A DCF quoted to the rupee is a claim the model cannot support.
WACC
Fundamental analysisAlso called: Weighted average cost of capital
Weighted average cost of capital — the blend of the cost of debt and the cost of equity, weighted by how much of each the company uses.
In plain terms
The formal discount rate for a DCF, which most investors reasonably simplify into a required return by business type. Running the model at three plausible rates says more than deriving one precisely.