There are different methods to estimate terminal value in a DCF valuation. You can estimate terminal value in a DCF valuation using any of the common methods: perpetual growth rate, multiples of earnings, cash flows or revenues, or less common methods such as orderly liquidation value; or a fire sale value. The method you chose depends on the stage of the company and expected growth drivers as well as the information available.
Each method has its advantages and disadvantages!
The multiples approach to valuation is based on the valuation of comparable companies. So if there are errors in the valuation of those companies, those errors will get reflected here. Errors could be of value inflation or undervaluation or anything else, including picking non-comparable companies, etc. There is also an issue of circularity. Comparable companies’ valuations themselves may be based on DCF valuation, so in effect, we are translating a DCF valuation into a multiple valuation.