Build A Full Discounted Cash Flow Model for a REAL Company

[@KenjiExplains]

Take our finance & valuation course: www.careerprinciples.com/courses/finance-valuation-course

[@solomonbhandari-young4154]

Awesome

[@DorBahadurAleMagar]

Hello Kenji, After watching your video of DCF Model of Corporate Valuation, I am able to prepare the valuation of any corporations. Thank you very much for your kind contributions for the people all over the world who really want to start their career in Finance.

[@hersey1999]

Spent the last couple of weeks practicing DCF, now I feel comfortable to attempt to construct a DCF from scratch. Thanks Kenji!

[@dn.andresmunoz3008]

This bear market is a prime example of why we should have a strong foundation built & cash position in our investment portfolios.

[@ronaldjohnson1805]

I always keep emergency cash for expenses and more to take advantage of dips

[@raymondalvarez1994]

Many investors try swinging for the fences on high-risk growth stocks or crypto, without building a strong foundation first.

[@dn.andresmunoz3008]

@@raymondalvarez1994 If you can handle the volatility and invest in great growth companies, there is nothing wrong with that.

[@raymondalvarez1994]

@@dn.andresmunoz3008 well, most investors just can't handle the volatility

[@dn.andresmunoz3008]

@@raymondalvarez1994 Howard J. Alexander. A U.S regulated investment manager is a good coach. He advised me and I kept emergency funds for buyng the dips. You should only be taking out what can be taken out during downturns. Do not be tempted to sell. All that you invested over time especially during upward trends will be lost.

[@RaltahookCrafting]

Just landed on your channel, just fron this video you already sold me your Valuation Course, keep up with the great content!

[@KenjiExplains]

Awesome! Thank you!

[@nicogerst6007]

For anyone wondering @14:51, Kenji SUBTRACTS the Change in NWC because it is a negative value, and subtracting a negative is actually an addition. Because technically, a DECREASE in NWC needs to be ADDED to calculate FCFs.

[@caitlynlazzarini7038]

So if our own individual change in WC is positive then we would +change in WC not subtract?

[@alisherzhakaibekov1620]

You are right. He seems to have made a mistake

[@powerhouseinco9664]

also why does he add the growth rate for the TV?kzbin.info/www/bejne/bWjbnKijpc6iapo

[@olayemitemidayo9023]

@@alisherzhakaibekov1620 He did the right thing. When you have two negative signs, one turns over, and they add together to make a positive.

[@nasirhalimah7021]

@@olayemitemidayo9023 adding two negative values will still give negative unless you multiply. I guess he made a mistake on that part. More so, increase in current liabilities means that business has more short term cash available, while increase in current assets (inventories and receivables) means that less cash is available.

[@AntonioLopez-ds5so]

Hey, Kenji, awesome video as always. Thanks especially for this part 2:03 where you explain how to project the revenue in more detail. I am learning financial analyst and I struggle a little bit with some industries because I find hard to identify the revenue drivers and the revenue items. Keep it up, brother :)

[@vladislavemelianov3130]

Kenji, thank you for all your efforts and knowledge that you give to many people. I am sure that you are an example and a motivator for people who want to break into this industry. By the way, as a further idea. Would you like to make a video about the LBO model? I am sure that many people will be interested.

[@florianrec4913]

yeah pls

[@justinlovro8301]

Would love to see an example paper LBO model or even a more advanced one

[@Mad1080]

Super Super Super.... Well explained.. Calm, cool, and with patience... make many more videos of DCF with hard way and practical knowledge and also provide excel sheets

[@kuralaysaimassay9813]

Dear, Kenji! This is my first time commenting under KZbin video! Thank you a lot for your explanations! You helped me a lot on my thesis diploma project!

[@KenjiExplains]

Happy to hear that! thank you for watching the videos :)

[@davidmelonakos6565]

Best explanation for this tedious subject that I've ever seen!!

[@KrishnaShah-hp7su]

You should've also educated us about the Assumptions and all

[@TriMinhNguyen-le5rj]

I think assumptions may be based on nature of industry and company so it is quite hard to explain through some videos.

[@m4a1gaming69]

Or else use forecast formula using weights in another column

[@thesnackbandit]

Only takes decades to do that 😂

[@leaknherjourney]

😢😢 yep that’s the hardest part 😭

[@balaramsprasad]

Super Video Kenji, Its literally Learn with Kenji now. A lot of takeaways from your videos. Expecting more of these types. Thank you

[@WillDawson-fh6ky]

Hi, can someone please explain. I'm very confused as a I feel Kenji may have mixed up the EBIT and the EBITDA around 4:00-5:00. Is it not the EBIT that is equal to Revenue - COGS - Operating Expense not the EBITDA?

[@edgargaspar2248]

Dude, you are a life-saver and a great teacher!! Thank you!!

[@nton3845]

My guess is that it is a retail company based on the high level of operating expenses. Great video, thank you; it is helping me to complete an assessment for a position I am interested in

[@Roy-mk9zl]

Even telecommunications have high expenses...

[@king3650]

8:27 Why did you multiply by 360 to get the days outstanding values instead of 365?

[@luisnoronha2297]

Tks for the video. One quick question. In the WACC tab the equity is listed as 214,560 but in the balance sheet tab the equity is listed as 18,078. Can you explain why the big discrepancy ?

[@fassmo]

Does anyone have an answer on this?

[@princedennisjr6246]

@@fassmo Yeah, confused about this as well.

[@bodgukalism3]

I literally love you. Thank you for all the hard work.

[@Joy_Christo]

I did exactly the same thing. All the values were right but I got the sensitivity table wrong.. I use a MAC, Is there something else that needs to be done to paste it as values?

[@user-xo6kc6zp3r]

thanks Kenji, this is a perfect guide to the valuation project i have at school

[@productivelife]

Better explained than my 3 years in uni😂

[@MJ-cg8vp]

Hi Kenji, where/how did you get the total equity value at 17:21?

[@camlex6310]

Really helpful!! Breaks it down so clearly

[@tesseractharpy6138]

At 13:19, would the amount differ in hundreds? Because I followed your step, and drag to the side with proper lock on revenue based on column, but it shows different in hundreds, H6 you got 1326, I got 1523.

[@elliottmeuer8221]

me too

[@grazielalindahl6236]

Your videos are amazing! Easy to follow and organized. Thank you!

[@JD-mo3ws]

Hello Kenji! Around the 14m mark: I think we SUBTRACT increases in NWC to get from NOPAT to UFCF! Increases to liabilities represent cash INFLOWS rather than outflows, so the formula should be [-(F18-E18)] for cell F17, for example. Otherwise a great video! Thank you for sharing!

[@xiaowenliu2964]

I agree

[@rahulche2011]

Very nice presentation and excel compilation. Thank you

[@alvareza3]

For days outstanding. Why use 360 and not 365?

[@MarqusAvalos]

360 is the standard in the banking and finance industry... it's divisible by 12, companies don't work 365 days a yr (holidays), etc.

[@shalabhmisra9073]

Kenji, thank you for sharing this. Very helpful. Do you have any video that educates about building a financial forecasting model? I am looking to learn how to project - Revenue, Production, Cost of Revenue, and Cash Flow for the next 3 or 5 years.

[@olayemitemidayo9023]

God bless you @kenji. This is a blessing to me personally

[@mikeyfallon9706]

kenji, at minute 1:46, how did oyu establish the growth rates for the years??? thanks

[@Jagicheru]

Thank you for this, you have made it very bite size, enjoyable.

[@ahmeddilshad4828]

Kenji hats off for you brother ❤

[@willzinner8813]

been waiting for this one thank you sir

[@yassineouzlifi1902]

Hi, where are you getting the equity value from in the WACC tab ? I.e. 234,550 This should be the value of equity from the Balance sheet, isn't it ?

[@Sky_Hustle]

That is most likely the market cap of the company on the day he put this together(2022-07-02). When calculating WACC, the market value of equity is typically used in the formula.

[@afsanehbozorg2001]

Kenji, it was very useful! thank you

[@andreugiro2807]

I needed this type of video! Thanks man!

[@KenjiExplains]

Glad you liked it!

[@YogiKharade]

Can you explain how did you the discount rate for forecasting the revenues for the FCF

[@andychavez]

I wish you could explain what you mean by "model out each line item" in making revenue growth projections at 2:00. I hope you can provide as some sources how to do about it. Thanks.

[@ykn7018]

great as usual, Kenji. A question. when you calculate the Enterprise free cash flow you seem to exclude interest expense. when you calculate the share price / equity value, you seem to also exclude interest expense. So is interest expense irrelevant to both the firm's free cash flow as well as to equity valuation?

[@seanlee595]

Hi Kenji, to answer your question, my guess is some type of online subscription company. Given the huge amount of cashflow, is it Netflix?

[@faisalym]

Thank you Kenji. Very useful.

[@benjaminli3808]

How are the projected growth rates per year often set?

[@mclovin7159]

Hey Kenji! great videos.. I want to ask you what laptop would you suggest to perform all these task for a ms in finance student which laptop would be the best?

[@kangruiong9196]

how did you calculate the equity value?

[@mayidgallo9052]

What revenue growth or which statement can be considered for a pharma company?

[@abhirajak1851]

You will end up a million subscribers

[@KonstantinosPanetsos]

The company is costco wholesale corporation the statements match and the stock was around 360$ when the video was published. I have a university project on costco thats how i noticed

[@Roy-mk9zl]

He took 3% growth rate for the industry but retail was projected to grow at 9%. Can you please put some colour on this?

[@fozilkamolitdinov7112]

hey bro, everything is fine and understandable but in Net working Capital you took three indicator for current assets, but in the data there were actually 5 if I am not mistaken. My question is why did you take those three?

[@syt4453]

Hello Kenji. Nice video but I have a question. If you pay $100 to your payables, that means the change in net working capital will increase, and thus decrease the cashflow by $100 before discounting in the DCF model. Later on, when calculating equity value from enterprise value, we add less cash in because we paid to the payables. So, it looks like there is double counting of the $100 we paid. Once it deducted the enterprise value in the DCF due to net increase of working capital, and again reduced by $100 when adding (less) cash to arrive at the equity value.

[@TheInfernalRain]

Really great video. But link for excel file not working, can u pls reupload it somewhere?

[@krishnaNishad138]

how do you find revenue growth rate of future ? can you explian please

[@kangruiong9196]

for the debt, did you take an average from all the years?

[@HankTheTank23]

When you calculated Days Sales Outstanding, Days Inventory Outstanding and Days Payable Outstanding, technically you were supposed to use the average of the pervious year and the current year's balance sheet figure.

[@moonheekim3882]

Thank you so much for your kind explanation and excel files!!! It'd be a greatttt help! I have a question though. Reg. Fixed Asset tab, I usually look for Capex amount from the cash flow chart.. but in your case, you did Ending PP&E - Beg PP&E + D&A. In this case, it doesn't match with the Capex amount from the cash flow. Am I doing something wrong?

[@kangruiong9196]

how do u justify calculating the percentage against revenue for the components under current assets and liabilities?

[@michael02468]

Hi Kenji, why doesn't the formula for calculating CapEx match the CapEx on Cash flow statement on fixed assets sheet? Why did you calculate your CapEx instead of using the CapEx number from Cash flow statement? thanks!

[@alejadroigoyanes]

very good but u need to make a full video in more detail please! this just scratches the surface

[@LoveU_Allthetime]

If the tax rate is different each year, when calculating the WACC, which tax rate does it take? Can there be multiple WACCs based on the year?

[@RitaWong-nd7yb]

Hi Kenji, thank you very much for the video. It is very informative and useful. Just one quick question: At 06:40, you mentioned the equation for non-cash working capital formula is: current assets - cash - current liabilities, but then at 13:50, the formula for calculating NWC (or change in NWC) does not include the item "cash". Can you please explain why? Thank you very much!

[@JayB948]

Cash is already included in the current assets figure

[@user-yv6eo7io8s]

This guy has my heart!

[@financialedgetraining]

Very informative video! 🧐

[@bigboat8329]

12:34 is it always appropriate to extrapolate historical averages for future years for the % of revenue, % of additions sections? My sections are Addition as % of net sales, Depreciation as % of additions, Interest income % of cash & cash equivalents

[@Roy-mk9zl]

Yes. That's important to even out the effects of large revenue growth driven metrics in exceptional years.

[@Soarin8]

Great Video, thanks for sharing!

[@solomonbhandari-young4154]

Kenji always on point

[@andymarci6766]

Great content MR!

[@kingo_of_bingo]

Thank you for this great video. I was just wondering how did you get the growth figures? On what did you base all of these assumptions?

[@Roy-mk9zl]

Is it okay to take company's projected growth rate from the guidance for revenue projection? And I am really confused about the growth rate Kenji used while calculating the terminal value.

[@lannytohjaya4164]

Hi Kenji, good explanation but why the EBITDA and EBIT the answers is different when using calculate using the formula?

[@balancedthinking5005]

Thanks, Kenji it's a great video. I have a few questions. How do you calculate the beta in PE? What's the growth rate of equity based on? The current value may be based on the 10 year of today but as an investor don't we need to project where the 10 year will be in the future? How do you adjust for inflation in a case when real yields are negative? For the expected growth rate do you use nominal growth or real growth? Why don't you use the revenue growth of this particular company for the growth rate? What's the expected market return based on?

[@i.HeshamHassan]

It's really a great effort, thank you very much, I benefited a lot from you Thank you again and wish you all the best

[@KenjiExplains]

Glad to hear that!

[@rukhsaarp5013]

Hello can please explain how did you get 10% revenue growth in 2022E and so on

[@DigvijaySharma574]

Thanks for such a informative video. Can you mention name of company whose valuation you do here

[@hisokaamorou4211]

Salute to you Kenji!

[@xfzhou4597]

so awesome，so useful！thank you so much!

[@EvEnPvP]

Awesome video! How do you automatically get data for a new company into the same excel sheet? Or do you have to do it manually? Thanks

[@amrsultan3540]

For publicly traded companies, accessing financial statements through the investor section of their website is common practice. These statements typically include earnings summaries, financial reports, and presentations, often available for download in formats like Excel or CSV. However, when it comes to private companies, they are not required to disclose their financial information publicly. So, getting access to their financial data can be challenging unless they voluntarily release it or share it through other means. For risk measures like Beta, various financial platforms and sources such as FINRA, Yahoo Finance, Bloomberg, or other financial data providers often offer these metrics for different industries and companies, both public and private.

[@LoveU_Allthetime]

If the tax rate is not the same each year, then the WACC is also not the same year, is it?

[@aayushiparikh2317]

What formula have you used to calculate the growth rate? Forecast or RRI (CAGR) on excel? theyre different than the ones hardcoded in the excel. i tried averaging both the methods but still a few % dont match. Please mention!

[@aniruddhaghosh9823]

Sir what if the capex is negative should we add this to our FCFF ? Please help!

[@yolsolano]

You are the best!!!

[@benjaminli3808]

Can we not use purchases of property and equipment in the cash flow as the CapEx values? Is it common practice to make an extra calculation for CapEx?

[@scuffed_derivative]

That’s what he did in the video. “Capex” was the same as “purchase of PP&E”. The calculations he made were to find Ending PP&E

[@kimnganle9553]

Thank you for making such a simple, easy to understand video. It really helps me a lot. Thank you!

[@dsiqz]

For DSO, DIO, & DPO, why is it multiplied by 360 instead of 365?

[@liamdillon9465]

Damn dude this was awesome

[@udayteja6595]

Thankyou very much for the great content.

[@adityashetty4640]

why at 8:11 are you multiplying with 360?

[@adrianandrone4115]

Hi Kenji, thanks for the video! I have a questions, from where do you got the Revenue Growth 10% on 2022E and then for the other ones? Thank you!

[@vignesh338]

what if there are discrepancies such as in NWC calculations as its in a very fluctuating way what can be done for assumptions

[@vittoriovalerosalim7779]

is there like normal range for WACC percentage?

[@tf285]

Amazing video. I think you made a mistake when calculating the CAPM, you didn't subtract the Risk-free rate at the end of the CAPM formula. B(E(RM)-RF). Someone, please correct me if I'm wrong.

[@zachtrisler9248]

He used the market risk premium, which is equal to the expected return on the market minus the risk-free rate. So, it's the same number.

[@simranharsora5420]

excellent video!

[@hamzarashid4306]

Hi, I think there was an error in 2:34 - the tax projection was 21% which I assume is based of the average of the actual tax% of EBIT per your approach to the COGS and SG&A projections. However, 21% is not the correct average but 23.4% is the correct average. Please let me know if I have misunderstood something!

[@GHOST139official]

Why would you use the average tax rate? Just look up the current tax rate?

[@OneSaaho]

What Company is this? I am thinking it is a Declining Retail Company. Also why did you not add Cash and Cash equivalents in the current assets and term debt in the current liabilities? Where did you find the beginning PP&E? Also for the debt in the WACC tab, for long term debt, do you include long term lease liabilities or just long term debt? For the Expected Market Return number for the WACC, how did you get that 7.8% number?

[@kumarkanishk6007]

Hey Kenji, when I am making sensitivity table, for some unknown reason my middle figure is not as the calculated implied price. Can you help?

[@wilsonagaba7083]

Thanks for the video. How do I get the expected market return? And how can I get the beta of a private consulting firm in Nigeria?

[@aashitajain1028]

Hey @Kenji why have we not included operating income and preopening expenses while calculating FCFs?

[@vincentdaly1766]

Hey unrelated to the video, but around how much do base level analysts at Goldman Sachs make?

[@박이레-q7g]

This was mad helpful. Thank you so much!

[@KenjiExplains]

Glad it was helpful!

[@codmplayer9302]

do i always need to use the absolute value (CAPEX) IF ITS negativ make it positiv ? and for D and A?

[@AnhVu-ww8hi]

Hi Kenji, how I can find Debt on WACC in the Bloomberg platform. Its information seems to be hide on the Bloomberg platform :(((