Is it possible for a DCF to be useful for a company currently experiencing negative cash flows?

A DCF analysis can indeed be useful for a company currently experiencing negative cash flows if there is a potential path to positive cash flow. In a discounted cash flow model, the intrinsic value of a company is derived from the present value of its expected future cash flows. Even if a company is currently operating at a loss, investors and analysts can assess its future profitability potential based on factors such as management's strategic plans, market conditions, and industry forecasts.

By projecting when and how the company might transition to positive cash flows—such as through new product launches, cost reductions, or growth in revenue—analysts can create a model that reflects the company's expected financial trajectory. This forward-looking approach is essential because a significant number of growth-oriented or start-up companies initially incur losses while they invest in scaling operations or capturing market share. As long as there is credible evidence of a recovery or growth strategy that may lead to positive cash flow in the future, a DCF can provide valuable insights into the company's value.

This potential for future cash flow is what justifies the use of a DCF model even for companies currently facing negative cash flow situations.