Why investing is not easy:
- People apply valuation methods/multiples like PE, DCF across companies and across sectors without understanding the risks of using such valuation tools.
- The key risk is that the use of such tools involves making forecasts. Forecasting could involve disguised subjectivity which is affected by human behaviour. And for some businesses forecasting could be difficult if not impossible.
In this video, Rohan Samant, Assistant Portfolio Manager, Multi-Act Equity Consultancy Private Limited, helps understand why one needs to be careful while selecting a valuation method and how to make the valuation method selection process simple.