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How important to use three approaches in order to triangulate a valuation based on dividends, cash...

How important to use three approaches in order to triangulate a valuation based on dividends, cash flows, and earnings?

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Dividend based approach value the company by its future dividends predictions discounted at present value by using an appropriate discount rate. This method focuses on wealth distribution to shareholder through dividends.

The Cash Flow valuation is based on projections of future free cash flow of a project then discounting them to the present value by using appropriate discount rate. This approach estimates of the intrinsic value of the company based on its capacity to generate cash flows or its dividend paying capacity in the future.

The Earning based valuation of stocks can be done by using the price-earnings (PE) ratio and it focuses on wealth creation to the shareholder of the company.

All the three approaches of valuation are important in order to triangulate a valuation based on dividends, cash flows, and earnings because they complement each other and give a broader prospective to look at the worth of a company. If the similar assumptions are taken in each valuation method then the value of the stock will be comparable by all the three approaches.

jeff jeffy answered 1 year ago
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