Yes, I do have a "love" for CST - hopefully it will not be unrequited love, lol.
DCF valuations in various guises are often used in the broker community. I have seen a DCF valuation done on CST by Lodge Partners a couple of years back.
In my opinion, however, most DCF valuations that I have seen are flawed in one way or another. As an example, most broker DCF valuations that I have seen make an attempt to build risk into the valuation either by increasing the Discount Factor or by running weighted multiple projections. I have come to the conclusion that doing these things make no sense. It is bad enough to make a single projection of a sales future but four? and then to weight them?
In defence of brokers I guess we should realize that any individual broker researcher may be covering 10, 20 or more stocks. It would be difficult for them to keep totally on top of each and every one. On the other hand, I am a sad individual with no life and have spent the last three years living and breathing CST. (I know fill in the box labelled "Hobbies" on forms with "Tuberculosis").
DCF valuation is a fascinating field of study which I am feeling quite comfortable with. For me, it moves me away from the "gambling" aspect of the share market and, instead, developing a business view. In my "day job" I own and operate a small business so looking at a business as an investment entity makes sense for me. DCF valuations seem very natural to me.
On the other hand, I am still learning. Part of my reason for doing the CST DCF valuation is in practising what I am learning. If any brokers etc see any value in my work then as far as I am concerned they are free to use it (my reward will be when CST "comes home") :)
CST Price at posting:
0.0¢ Sentiment: None Disclosure: Held
