Discounted cash flow (DCF) method

The DCF method determines the value of a company by discounting its projected future free cash flows at a rate reflecting the risk inherent in those cash flows — typically the WACC for the unlevered enterprise value approach. It is an intrinsic valuation method: value is derived from the company's own capacity to generate cash flows, independently of market pricing. It is particularly relevant when the company has visible, quantifiable prospects and when the key assumptions can be robustly documented and defended.

‍

Example: a Swiss services company projects normalised free cash flows of CHF 1.2 million (Y1), CHF 1.4 million (Y2), CHF 1.6 million (Y3), CHF 1.8 million (Y4) and CHF 2.0 million (Y5), with a terminal growth rate of 2.0%. Discounted at a WACC of 9.5%, the enterprise value is CHF 22.8 million — compared to CHF 21.5 million from the market comparables approach, confirming the valuation range.

‍

Hectelion's DCF models are built on detailed, justified assumptions documented in a rigorous valuation report, designed to withstand auditor and counterparty scrutiny.