Estimating Future Cash Flows for Your DCF Calculations

In this video you'll learn how to estimate future cash flows based on historical free cash flow rates using the compound annual growth rate calculation as well as using the power of google spreadsheets to calculate the growth rate in a simple and effective way.
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Thanks for Chris and Sam for awesome tip on how to calculate growth rates using the chart function + adding an exponential trend line. Amazing!
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[@EarnMoreSpendLessInvesttheRest]

Hi Richard! Great video. Super informative. Thanks so much for the shout out and we are glad you found the technique useful. :)

[@IntelligentStockInvesting]

Thank you!!!

[@SagangaKapaya]

This is what I have been looking for. Wow. Now it makes a lot of sense for my project. Thanks a lot

[@IntelligentStockInvesting]

Wonderful :)

[@Don-ec3vc]

Any way to solve it when the starting number is negative? The formula doesn't work then.

[@IntelligentStockInvesting]

I have another video on the channel about valuing companies with no earnings

[@Don-ec3vc]

@@IntelligentStockInvesting Thank you for the reply. Great content!

[@SneakyWoolCloth]

Why am i struggeling with this? Finding the EPS trend. -0,49 / -0,78 / -0,04 / -0,08 / 0,21 so this formula should be (0,21/-0,49)^(1/4)-1 = Error...... power evaluates to an imaginary number. Tryed (0,21/-0,49)^(1/5)-1 = -184,41%....thats wrong. (0,21/ABS-0,49)^(1/4)-1 = -19,09% wrong again.... What do i do wrong here?

[@janbartos4502]

You cant do it with negative numbers

[@SneakyWoolCloth]

@@janbartos4502 So there is no way to do this?

[@janbartos4502]

@@SneakyWoolCloth I personaly dont know but you can check out Aswath Damodaran which is a very respected guy about valuation and I think he talks about your scenario in one of his videos

[@AncalagonGames]

the CAGR calculation is wrong the 10 year is not 1/10 it needs to be 1/9 for 5 years it need to be 1/4

[@IntelligentStockInvesting]

An easy way to check your work is to do the calculation with the starting number using the growth rate you calculated. $0.17 growing by 74.24% per year for 5 years brings you to $2.73 (which is what the free cash flow was 5 years later). So the 5 year annualized growth rate is 74.24%. If you used 1/4 instead it would equate to an annual growth rate of 100.18% which would grow $0.17 into $5.47 after 5 years. Please let me know if you still think I'm missing something and exactly why. Thanks!!

[@brandonfonseca9279]

Richard is correct in this case. When doing a CAGR computation you need to treat the first number (present value) as "year 0" since no growth is applied. The index of t=1 indicates a year of growth (ie value at the start of year 2)

[@meixo9083]

i hope this channel grows. you provide VALUE!

[@IntelligentStockInvesting]

Really appreciate you saying this. sorry for the delayed response, I've been sick for the past week or so. Almost 100% again though :)

[@vishaldahiya1222]

Sir who to calculate fcf growth of first 3 years please reply sir

[@johannes2072]

Thank you Richard :)

[@IntelligentStockInvesting]

You are very welcome

[@korayhalil2155]

Godly video.

[@IntelligentStockInvesting]

Thanks :) Glad you enjoyed it.

[@gn3997]

Thanks Richards,really helpful

[@IntelligentStockInvesting]

Glad it was helpful!