Discounted cash flow analysis vs Comparable Company Analysis

On the Kaplan note page 364 of the Corporate Finance book,

It mentions that the advantage of using Dicounted cash flow analysis has “the estimate of company value is based on forecasts of fundamental conditions in the future rather than on current data”.

However, they also inditate that the advantage of using Comparable Company analysis has " estimates of value are derived directly from the market rather than assumptions and estimates about the future.

I feel like these two are contridict to each other. Can someone helpe explain this?


I would say that using one method rather than another strongly depends on company kind (phase of activity, size, ownership -private held or listed on stock market), industrial sector, then overal market conditions in which it operates, thus market valuation efficiency and last but not least is availability of data to analyst. So, that’s why it sounds contradict. Same method can be efficient to one company valuation and completely unefficient to another.

The Democrats say that they’re better than the Republicans.

The Republicans say that they’re better than the Democrats.

Are these statements contradictory?

It will depend on what data you have available in the moment of valuation. If fundamental data is not well set, then use comparables. If not comparables data is available, but data on fundamentals is good enough, then use DCF.

Thanks a lot for everyone’s help! This is good to know. Good luck to you all!