The fact that young companies have limited histories, are dependent on equity from private sources, and are particularly susceptible to failure all contribute to making them more difficult to value. This section begins by considering the estimation issues that we run into in discounted cash flow valuations. Then we follow up by evaluating why these same issues crop up when we do relative valuation.
Intrinsic (DCF) Valuation
Chapter 2, “Intrinsic Valuation,” described the four pieces that make up the intrinsic valuation puzzle:
Cash flows from existing assets
Expected growth from both new investments and improved efficiency on existing assets
Discount rates that emerge from our assessments of risk in both the business and its ...