Some financial authorities suggest that the true or intrinsic financial value of the common shares of a company can be determined using a discounted cash flow (DCF) analysis. That is, the intrinsic financial value of a share is equal to the total value of all the dividends paid for each share, into the indefinite future, discounted to present value. (Present value is based on the fact that a dollar in your hands today is worth more than a dollar that will be paid to you 10 years from now, because of the effects of monetary inflation). To calculate the intrinsic value of a common share you need to estimate: 

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• The annual dividend that will be paid for each share, for each year into the indefinite future, and

• The annual discount rate (inflation rate) that will apply to each share.  

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In practice, the calculated intrinsic value of a share is extremely sensitive to the values chosen for both the annual dividends that will be paid in future years and the discount rate that is chosen for the calculation. Consequently, the calculation will yield an extremly wide range of intrinsic values, even if the values selected for both the dividend payments and discount rates fall within a reasonably narrow range. Consequently, such intrinsic share prices are of little use in determining whether common shares of a particularl company are over or undervalued with respect to market prices. 

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In my opinion, DCF analysis, although it may be a very logical and mathematically elegent solution, it is of little practical use for establishing a reasonable price for common shares.   ​