It is impossible to forecast the cash flows and the returns of a business beyond a few years. That makes discounted cash flows nearly useless despite being widely used across the industry by both regular and value investors. Even if you could predict their cash flows further out, the disproportionate impact that the terminal growth rate and the discount rate have on the valuation make the exercise de minimis.
Buffett himself never did this and is famous for never using spreadsheet technology. Instead, he would adjust current earnings and compare it to the stock price on an adjusted-PE ratio to determine if he was getting a good deal.
The lesson here is not only that complex DCFs are not necessary, but that making investments is much closer to a qualitative exercise in judgement than a qualitative one with some kind of magic formula.
Connections
Detailed Forecasting Adds Little Value
Link Explanation: Much effort has been spent by investors and academics to quantify and mathematically systematize investing. But it does not work. We simply cannot predict the future and the methods we use, such as discounted cashflows, depend on inputs that are too volatile and interpretative to be useful. That is why investors like Seessel, and Marathon Asset Management in the linked note, and Buffett himself, never liked or use these tools. Instead they find other ways to support their qualitative judgements.