||The subject of this research is using monthly sales into forecasting revenues of the Free Cash Flow, FCF method, one of the Discounted Cash Flow, and according the result invest in real market.|
Using monthly sales into FCF method, and forecasting cash flow for the next two years and terminal value of the corporation. Measuring corporation’s fair price, and comparing with real market prices. In order to improve the application of FCF method, do a back test for the difference of the real prices and estimated prices.
Monthly sales, quarterly financial statements, and predicted estimators are helpful to build a FCF method. FCF are suitable for measuring the corporation which has constant profit margin, low re-investment rate, growth companies. On the other hand, FCF method is not recommended for measuring the company which is declining, high investment rate.
Taiwanese stock market is momentum in a short period, especially they are always over-valued for the good companies. Hence, buy low are suitable for FCF method and PE method, short sell are worse than the market.