The Valuation Analysis of NEXT.PLC based on the DCF Model

Abstract

The discounted cash flow model (DCF) is also widely used to estimate the value of a company, and despite the simplicity of the DCF model, this valuation has certain drawbacks as the uncertainty of the estimate and the assumptions made when forecasting are not negligible. In this paper, financial information from NEXT.plc is used to carry out a business valuation and compare it with the current market capitalisation. The calculations lead to the conclusion that the original valuation performed by the DCF model is higher than the current market capitalisation of the company. The assumptions used in the valuation are subject to change with the actual economic environment, and therefore the results obtained are somewhat different from the actual. It is recommended that more understanding of the social and economic context be required when applying the DCF model to valuations.