Valuation Methods - The article discusses various methods sell-side analysts use to determine a company's "fair" value, highlighting the DCF method as complex and prone to biases such as overconfidence and anchoring [1] - The multiples approach is noted for its simplicity but relies on the assumption that peer companies are fairly priced, which historical data often contradicts [1] - Reverse valuation is introduced as a method that starts from market price and discount rate to uncover the free cash flow assumptions embedded in the price, providing a more straightforward assessment of market beliefs [1] Free Cash Flow Analysis - A Free Cash Flow to Equity (FCFE) model is utilized to ascertain what truly belongs to shareholders, calculated as Earnings + Amortization – CAPEX – average acquisition cost = FCFE, while ignoring working capital and debt changes [1] - The analysis emphasizes three critical numbers: earnings, amortization, and investments, which are essential for accurate valuation [1] Forecasting and Discounting - The H-model is applied for forecasts, featuring a 10-year two-stage growth fade with terminal growth aligned to the risk-free rate, specifically the 10-year government bond yield [1] - All cash flows are discounted using the cost of equity formula: RFR × beta + 5% ERP, resulting in a clear and noise-free valuation of the business [1]