If a company’s capital expenditures are simply maintaining the company’s position in its markets, it free cash flow may be unduly high
The sell side analyst’s target prices do not estimate fair value. DCF estimates do just that. Investors should not confuse the two.
About forty years ago Buffett experienced a Damascene conversion
We are going to want to get a significantly higher return, obviously — in terms of cash produced relative to the amount we’re outlaying now — for a business than we are from a government bond. That has to be the yardstick at a base.
Opinions of fair value based on DCF calculations are necessarily inexact (rightly vague?). But, at least they at least ask the right question.
A CAPE ratio of 26.91 does not prove the stock market is overpriced. The stock market today may be overpriced or underpriced. CAPE using a historic average as a benchmark just doesn’t tell us one way or another