Daniel Sweeney

When gauging the intrinsic value of a company using Discounted Cash Flow Analysis, three inputs strongly affect the terminal value: cash flow forecasts, the discount rate, and the growth rate. While best methods to estimate cash flows and discount rates have been studied extensively, methods to estimate growth rates are unreliable and often lack quantitative backing. The aim of this project is to address this void by creating a method to estimate long-term growth rates (over 5-year and 10-year periods). Then, this project will create sector specific models to estimate long-term growth rates using factors unique to specific sectors. Finally, it will devise a trading strategy that picks best value stocks based on DCF valuations using the company’s estimated long-term growth rate to maximize excess returns to the overall market in short-term time horizon (1-year and 3-years).