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Linn Energy, LLC Message Board

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  • farmercapitalist farmercapitalist Jan 20, 2013 11:09 AM Flag


    do all MLP's define DCF the same? What is the method LINE uses? Is DCF a more useful metric to track than EBITDA for LINE?

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    • It seems some around here klike to complicate matters when investing such as using DCF because they beleive they know all ans it sounds impressive to use such acronyms,

      Problems with DCF
      1.Operating Cash Flow Projections
      The first and most important factor in calculating the DCF value of a stock is estimating the series of operating cash flow projections. There are a number of inherent problems with earnings and cash flow forecasting that can generate problems with DCF analysis. The most prevalent is that the uncertainty with cash flow projection increases for each year in the forecast - and DCF models often use five or even 10 years' worth of estimates. The "out" years of the model can be total shots in the dark. Analysts may have a good idea of what operating cash flow will be for the current year and the following year, but beyond that, the ability to project earnings and cash flow diminishes rapidly. To make matters worse, cash flow projections in any given year will most likely be based largely on results for the preceding years. Small, erroneous assumptions in the first couple years of a model can amplify variances in operating cash flow projections in the later years of the model.

      DCF model discount rate is always theoretical and we do not really have any historical data to draw from when calculating it.

      Be Open Minded
      As an investor, it's wise to avoid being too reliant on one method over another when assessing the value of stocks. While most investors probably agree that the value of a stock is related to the present value of the future stream of free cash flow, the DCF approach can be difficult to apply in real-world scenarios. Supplementing the approach with multiple based target price approaches is useful in developing a full understanding of the value of a stock

      Just be your own person when investing and take advice as needed to apply too what you have discovered about a stock purchase.

      • 1 Reply to opinionsarelike33
      • RLP'D gasland believer Opinions on a natural gas board 24/7.

        In truth all equities are valued on the EBITDA margin less necessary sustaining capital or true free cash flow. Problems with DCF are primarily related to properly accounting for the maintenance or sustaining capital. Better management teams do report this figure.

        EP MLPs can be valued on the Net Present Values of reserves/assets as well. But that assumes those assets will be converted into true free cash flow at some point.

        The thread came up simply because RLP'D was prattling about yield in a churlish therefore delusional way again.

        While I do understand how breath taking limited the understanding of RLP'D, RRB, Ron^3, Lisax and yourself is.

        I am still completely amused by the antics of attempting to claim I do not understand EBITDA and DFC. That is indeed desperately delusional! Therefore good entertainment today.

        Fact is no OLB member has ever expressed any basic investment concept correctly on this board. Not once and that demonstrates just how lazy and of little self worth all OLB members are.

        There is a much better way to live Abundantly. To have purpose in this life.

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