So basically, DCF valuation is looking into the companies predicted future cash flow (by using revenue, net income and margin figures) and discounting it back to the present day value to determine the fair price you should pay for it. For me, this is the more reliable valuation method.
The intrinsic valuation method (note: I may not be using the right "term") is simply using the revenue growth rate to determine future EPS (say in about 5 years time) and using the average PE ratio, to determine the price of the equity in 5 years time. So, Future price in 5 years = EPS (in 5 years) X PE (which gives you a price target). The value you get, halve it to compensate for any errors/assumptions, and then you can also apply a Margin of safety. Again, the 2nd valuation is much more less reliable in comparison to the first method, but it gives a quick/rough figure.
You can also apply the Dividend Discount valuation method here (which i am yet to do) since the company pays a stable, growing dividend.
Hope that helps.
SSM Price at posting:
$1.91 Sentiment: Buy Disclosure: Held
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