When would you not use a DCF to value a company?

A DCF depends on being able to forecast a company's cash flows with some confidence. So I wouldn't rely on it when the cash flows are too unpredictable. The whole method is a forecast discounted back to today, so a bad forecast gives a bad value. The clearest example is an early-stage company. If it has little revenue and negative cash flow, the forecast is mostly guesswork. Almost all of the value ends up in a terminal value that's many years away, so the answer is driven by assumptions I can't check. The second case is banks and other financial institutions. For a bank, debt is part of operations, not just financing, so unlevered free cash flow and enterprise value don't mean much. Deposits are its raw material, and interest is both its main revenue and its main cost. I'd use a different method for those.

A DCF depends on being able to forecast a company's cash flows with some confidence. So I wouldn't rely on it when the cash flows are too unpredictable. The whole method is a forecast discounted back to today, so a bad forecast gives a bad value. The clearest example is an early-stage company. If it has little revenue and negative cash flow, the forecast is mostly guesswork. Almost all of the value ends up in a terminal value that's many years away, so the answer is driven by assumptions I can't check. There I'd use revenue multiples from comparable companies or recent funding rounds. The second case is banks and other financial institutions. For a bank, debt is part of operations, not just financing, so unlevered free cash flow and enterprise value don't mean much. Deposits are its raw material, and interest is both its main revenue and its main cost. I'd use a dividend discount model or a residual income model, along with multiples like price to book. The third is very cyclical or distressed companies. With a commodity producer, the forecast depends on a price nobody can predict. With a distressed company, the real question is whether it survives, so a restructuring or liquidation analysis fits better. So the question I'd ask is whether I can trust the forecast and whether free cash flow is the right measure. If not, I'd use a method that fits the business.