Does the reliability of intrinsic value estimates derived from a multiples-based model and three flow-based models vary?

Abstract

This dissertation aims to answer the question of whether the reliability of intrinsic value estimates derived from a multiples-based model (one-year forecast earnings as a value driver-PE1) and three flow-based models (dividend discount model (DDM), discounted free cash flow model (DFCFM), residual income valuation model (RIVM)) varies. The results show that PE1-multiple performs best, followed by RIVM, while DDM and DFCFM perform rather poorly. In addition, it analyses three sell-side equity analyst reports about the Microsoft Corporation. Results show that two reports used MBVMs and one used DFCFM.