What should I do in this situation for the DCF model?
How could I come up with a forecast growth rate for working capital if the working capital of the company is always negative given the actual data? Also, for the company im following, whenever annual change in working capital is negative, annual change in total revenue is positive and vice versa, so I can't really use the ratio (annual change in working capital/annual change in total revenue). What should I do in this case to be able to forecast working capital into the future reasonably?
Thanks so much
You should be forecasting the individual components of working capital. In other words, forecast inventory based on turns, receivables from days outstanding, etc...
Do it like finance_king said, I do it the same way and it worked out. Good Luck
Also, when calculating unlevered free cash flow, should I also count sales of PPE and purchase of intangible assets under investing activities in the cash flow statement, or should I just consider CAPEX as the usual formula says?
And to my previous question, assuming that working capital is positive and growing, should I still forecast the growth of each individual component of working capital or I can just forecast working capital growth as a whole? Or is it better just to forecast the growth of current asset as a whole and the growth of current liability as a whole?
Thanks
Also, when calculating unlevered free cash flow, should I also count sales of PPE and purchase of intangible assets under investing activities in the cash flow statement, or should I just consider CAPEX as the usual formula says?
And to my previous question, assuming that working capital is positive and growing, should I still forecast the growth of each individual component of working capital or I can just forecast working capital growth as a whole? Or is it better just to forecast the growth of current asset as a whole and the growth of current liability as a whole?
Also, I am doing a comp. Once I have obtained the industry average forecasted EV/EBITDA, do I multiply the current EBITDA or forecasted EBITDA of the company I'm evaluating with this forecasted average?
Thanks
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