How do you value banks, REITs and utilities?
With industry-specific methods: banks by price-to-tangible-book against return on equity, REITs by funds-from-operations, utilities by dividend models with capped risk assumptions — never a one-size DCF.
A generic DCF misvalues whole industries, so Intrinsic Investor switches methods by sector:
• Banks — valued on price to tangible book value driven by return on equity versus cost of equity. DCF is not used at all: a bank's deposits are operating liabilities, not debt to subtract. • REITs — valued on funds from operations (FFO), the industry's real cash measure, with a lower discount rate reflecting contractual rents. • Utilities — dividend discount model with regulated growth assumptions (~3.5%) cross-checked against earnings yield, and beta capped at 1.0 — a regulated utility is not a momentum stock. • Cyclicals — valued on 5-year normalized earnings with a book-value floor, so a peak-earnings year does not masquerade as cheapness.
The full industry rulebook is on the methodology page.
Source: Intrinsic Investor (https://www.intrinsic-investor.com)
This answer is for educational purposes only, not investment advice.