Which is a pro of using a Discounted Cash Flow (DCF) analysis?

Using a Discounted Cash Flow (DCF) analysis provides an intrinsic measure of valuation, which is one of its primary advantages. This method focuses on estimating the present value of an investment based on its expected future cash flows. By calculating the present value of these cash flows, DCF allows investors to determine what an asset or company is truly worth, independent of market conditions, sentiment, or pricing anomalies. This intrinsic valuation is particularly useful for assessing the underlying value of a business or investment and can help investors make informed decisions based on solid financial fundamentals.

In contrast to this approach, other options mention aspects that either lack precision, such as relying on subjective accounting practices, or apply to different valuation methods. For example, dealing with companies that have unpredictable cash flows doesn't align well with DCF's strengths, which rely on stable and predictable cash flows for accurate projections. Additionally, DCF does require substantial data collection, including comprehensive financial forecasts and discount rates, which is not minimal.