DCF Questions
Maybe we can get a thread going for all modeling questions?
For example,
In constructing a DCF for an ER report.......
Do most poeple reconsctruct the I/S and balance sheet from what's reported on SEC.GOV? All the templates i've seen online where high level........(I.e Sales, COGS, SG&A, EBIT, I, Tax, NI, etc)
No need for balance sheet. Project out key income statement metrics, get down to EBIT, continue on to unlevered FCF.
Most of the time, if you can, use pro forma numbers given by management as GAAP regulations often will not give the best picture of earning potential, ie fresh start accounting etc. But getting pro forma numbers can be spotty sometimes it's just easier to use their 10Q's & K's
proforma working capital only.............
Right......I mean, i'm using these for a interview pitch, so management pro formas are hard to come by......
So it's normal to restate the IS for key items? What about BS? Leave as is?
basically.....does this work?
Can someone confirm if that is incorrect??
From there, I am unsure if I should project the BS from the SEC, or resate it like goog finance does....OR, if I should just project Working Cap/Cap ex.........
Discuss...............
If D&A isn't explicitly listed on the IS, it is typically embedded in COGS, so yes, you will want to get D&A from the CFS when doing your FCF calculation. Try to get your hands on some equity research for projections. If you can't get some, you can use historicals (adjusted for what you think might happen going forward) and project them out. If you really want to get precise you can project out a BS.
so if it's no explicit, do I NEED to add in D&A from the CF statement if I want EBITDA on my projected IS?
Yes. You only wouldn't add back D&A if 1) D&A is separate from COGS and 2) you were starting your calculation from Revenue, and subtracting COGS and SG&A. (Note: make sure you know where SBC is coming into play, typically SG&A, so you will want to add that back in.)
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