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Absolute valuation is calculated through the discounted dividend model (DDM) method and discounted cash flow (DCF) method where you only focus on the stock and look at its dividends, cash flow, and growth. Often companies don’t pay dividends every quarter or every year hence making their payouts irregular. D0 = D1 ÷ (r – g).
Discount Rate Discount Rate refers to the rate at which a stream of future cash flows is discounted to determine NetPresentValue. Multiple of Earnings Multiple of Earnings, similar to Multiple of EBITDA, refers to the multiple of a company’s earnings to establish the entity valuation of the company.
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