Dividend discount model
Valuing a share by the present value of the dividends it will bring its holder.
How to read the number
Suits mature companies with a predictable payout policy; for a growing business that pays nothing it returns a meaningless answer.
When the metric lies
The model values the flow to the shareholder, not the business: changing the payout policy changes the valuation even though the company earns exactly as much.
Also known as: ddm