About “Discounted Cash Flow Investing”

We live in a world dominated by a continuous and fast flow of information but, how many of them really matter? Probably a few.

The same happens with financial news. There is plenty of new information every day, and often, none of them really matter for your investment portfolio.

We got so used to this information overload that we don’t even notice it when the important news comes. We miss the moment to adjust our portfolio.

I regularly screen the best financial newspapers and, when I see impactful news, I take the company’s announcing it and make a full fundamental analysis and intrinsic valuation.

My goal is to answer the million-dollar question:

What is the fair value of the company? Are the shares over or undervalued?
How does the news affect the intrinsic valuation of the firm?

I translate the financial news into useful numbers to assess an investment decision.


Read the full TESLA valuation


The valuation will usually be of public companies which have recently been at the centre of the media’s attention with some controversial news, like Tesla’s investment in Bitcoin.

Even if every article is specifically tailor-made for the company and its industry, each analysis will go through the following points and questions (Q):

  1. Fundamental analysis of the company against its history (horizontal analysis) and the industry (vertical).
    Q: "Is the business improving or deteriorating? How is the company performing compared to its competitors?”

  2. Discounted Cash Flow valuation:

    • Definition and explanation of each assumption (growth rate, operating margin, discount rate, etc.);
      Q: How will the company perform in the future? Why?”

    • Discounted Cash Flow model with fair value calculation.
      Q: “How much is the company worth? What is the fair value of its shares?”

  3. Sensitivity & Scenario analysis: how the intrinsic value changes given a change in the assumptions.
    Q: “What are the main factors driving the price of the firm’s shares?”

  4. Montecarlo simulation: probability distribution of fair-values.
    Q: “At which price is it ok to buy with a good margin of safety?” 4

  5. Reverse cash flow valuation: reverse-engineering the stock price to get market expectations.
    Q:
    How the market is expecting the company to perform in the future given the current price?”

  6. Recent news analysis: an examination of the recent news's effects on the company's intrinsic value.
    Q: "How the business will be affected by the recent news?”

About me

My name is Michele Sanguanini, born in Italy and living in London, UK.

I’m an IMC certified (credentials) financial professional with 4 years of experience in providing strategic industry research, financial modelling and leadership on major growth plans for an FCA regulated UK broker.

I fell in love with the financial markets when I was 17 years old and, since then, I never stopped reading and learning everything I could about investing, valuation and finance.

I started this newsletter to share my passion for the sector with you and, hopefully, promote a healthy and long-term investment process and discipline.

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I put a price tag on the current "investing stories" by translating them into rational Discounted Cash Flow valuation models.