DCF stands for Discounted Cash Flow, which is a valuation method used to estimate the value of an investment based on its expected future cash flows. The method involves discounting the estimated future cash flows back to their present value using a discount rate, which reflects the time value of money and the risk associated with the investment. The formula for DCF is: DCF = CF1 + CF2 + … + CFn (1+r)1 (1+r)2 (1+r)n, where CF1 is the cash flow for year one, CF2 is the cash flow for year two, CFn is the cash flow for additional years, and r is the discount rate.

DCF analysis is widely used in investment finance, real estate, and corporate finance management to value securities, projects, companies, and assets. However, the method has some limitations, including the sensitivity of the estimation of cash flows, terminal value, and discount rate, and the variability in forecasting future cash flows. Therefore, DCF models are generally used to value companies with steady cash flows, such as mature companies in stable industry sectors like utilities.