What are the main weaknesses of a DCF analysis?

Answer

(1) Terminal value typically drives 60-80%+ of total value — highly sensitive to growth and discount-rate assumptions; (2) CapEx projections often assume maintenance levels only, missing future growth investments; (3) Built entirely on assumptions about discount rate, growth, margins — small input changes cascade to big valuation swings; (4) Inappropriate for balance-sheet-driven businesses (banks, REITs); (5) Doesn't work for cyclical businesses or companies with negative FCF; (6) Doesn't capture optionality (abandonment options, expansion options) — better handled by real options analysis.