DCF Net working capital questionIB
I've been working on a model for a newer, very high-growth company that sells protective coverings for electronics. Basically, when calculating free cash flow to the firm, if I change my assumption regarding an increase in NWC by only 1%, my FCFF decreases by almost $1 mm (about a 25% decrease for this company).
Is it normal for this to happen for newer very high-growth companies? Should net working capital growth be pretty much in line with sales growth, and should it have such a major impact on FCFF in this company's case?
Thanks for any help/advice you can offer.