Complexity of Valuation Models (Real Model Example Included)

Water Cooler Investing
#1

How complex should practical DCF applications be on the buy side/sell side. See the example here:

https://www.dropbox.com/s/k1d04w8wbs6qcpf/NYSSA%20IRC%20BITS%20Model.xls

Obviously they are modelling virtually everything in the example given (this was taken from a WSO member who used it in the research challenge hosted by CFA this past year). When evaluation a company to invest in do you rather want a simple valuation model or one as complex as the one chosen.

Also, he seems to breakdown every business segment including R&D, and taxes for each. Where do they typically find the info. The companies I have researched seem to just show sales and gross margin for their various business segments.

#2

You should be able to estimate taxes. And in terms of model complexity, it depends on the business. Some are more complex than others. I’d go with the simpliest model that adequately represents the business.

But I’m not technically buyside or sellside so what do I know.