Thanks John, appreciate you taking the time to reply and for your kind words.

It’ll be an ongoing process learning how best to construct the DCF, but I think holding on to the principles and purpose of the valuation model is the most important thing.

Good summary. I’ve used a similar approach (discounted dividend models) for about five years and I do think these models (cash flow or dividend-based) are useful, especially in terms of coming up with a stable valuation versus the usual price-earnings ratio approach, which can be affected by the ups and downs of last year’s earnings.

This type of thinking is also used by a couple of my favourite fund managers, Nick Train and also Ian Lance & Nick Purves, both of whom use models that forecast earnings growth out to some future “normal” year within the medium-term (5-8 years), and then come up with a valuation based on a historically normal multiple of those “normal” future earnings.

It’s different to DCF and DDM models, but in the same ballpark.

Good luck with your return to blogging,

John