Most valuations' case study tends to focus on companies that are exhibiting positive growth rate in their earnings or cashflow over the next 5 years. They project the running cashflow rate by forecasting them over the next five years then discount them to the present value using a predetermined wacc rate. The alternative is to use the Gordon Growth Model to identify the company's terminal growth rate then have them discounted back over the present value using the same method. The terminal value of a company is a rough approximation of its future value at some date beyond which specific cash flows cannot be estimated.
Example of a Gordon Growth Model using Terminal Growth Rate If you are a sell-side analyst working in a large corporation, it makes sense that you want to be covering stories that exhibits a potential strong turnaround or earnings growth as these exciting...