As with young businesses and growth firms, the characteristics of mature companies can create estimation challenges during valuations. This section first focuses on the valuation issues in the discounted or intrinsic valuation of mature companies. Then it looks at manifestations of the same problems when we do relative valuation.
Intrinsic (DCF) Valuation
If a firm’s intrinsic value is the present value of the expected cash flows from its investments, discounted back at a risk-adjusted rate, it would seem that mature firms should be easiest to value on that basis. While this is generally true, problems can still lurk under the surface of these firms’ long and seemingly stable histories.
We categorized mature ...