Discounted Cash Flow Skepticism

“Tim McElvaine’s caution on Discounted Cash Flow analysis.”

“strongly urge that more attention be paid to balance sheet items such as inventories, pension funds, and extra assets as well as questionable accounting techniques. I would prefer that Discounted Cash Flow Analysis be used only in an analyst’s private working papers. The link between the balance sheet and the profit and loss statement is the source and use of funds. We have done good work in analyzing this part of the business equation. We should do more. I think there is an extraordinary opportunity to build an outstanding business on the old-style value principles as modified by our recent experience and knowledge.”