7.24 Conclusions
Learning
how to assess the intrinsic value of a stock is important for
many reasons. Arguably, the most important reason is that
this lets you assess what the expected return from a stock is
given it's spot price. Assessing risk and return is
critical to every investment decision and this chapter has
worked systematically through this exercise. The important
concepts for working with the Free Cash Flow approach to
assessing intrinsic value were introduced and applied. As
a result, after
working through this chapter, you should be familiar with:
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· The difference between cash dividend and economic dividends
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· Various approaches to estimating free cash flows to equity
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· Estimating the growth rate of free cash flow
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· Estimating discount rates
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· Using these estimates to determine intrinsic value
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