How did you learn how to do three statement modeling?

Water Cooler
#61

When you say FCF-Capex do you mean CFO-Capex ? Because FCF is already net of Capex…

#62

Yeah that’s what I meant, cash from ops net out the capex. I generally adjust for the DA as well depending on whether Capex = DA, is < DA or > DA. Most businesses run = over long time periods so if the Capex or DA is temporarily low you would want to adjust for that. A lot of companies furlow their Capex coming out of a downturn so the actual cash generation can be less than you think during the early phases of a recovery.

#63

I learned 3 statement modeling in college when we analyzed publicly traded companies for the student fund but sadly haven’t gotten to do it in my current role (but that may be changing soon). That being said, I went through a method similiar to CvM. And I always used the CFO formula instead of the NOPAT formula because of its simplicity with higher precision. I remember the models taking me around 40 hours or so, but that was my first few runs and I wasn’t nearly as versed in Excel as I am now.

#64

Two things. I dumped ~30 hours into that model for a job interivew. At said job interview the homie was like, “So you feel this stock is undervalued at the moment, would you invest your own money in it?” I said, “Yes, I would, my estimates are all conservative and prudent.” Deep down I wouldn’t have touched said company with a 10 foot pole based on my adversion to my ability to pick stocks. However I ate crow and said stock went up exponentially after I submitted that model.

#65

Hi CVM,

Just checked your model.Its a masterpiece for new kids like us.Can you please tell me if we really use Residual income model and Fama french model in ER practically…or they are just bookish concepts…If you were to incorporate RI and FFM into your model what changes you would have made to your current model??

Moreover,i came to know that you were also planning to incorporate scenario analysis and sensitivity analysis into your model.Can you please give me some advice on how to incorporate scenario analysis/sensitivity analysis into a ER model…IF possible please mail me a model where scenario/sensitivy analysis are already done.

Once again…Thanks CVM for sharing your model with me…i really thank you a lot from the bottom of my heart.

I have message you the same in your private message but wanted to share it here on this thread also…

Quality threads are a rare on AF and this is one of such quality threads.

#66

Ok CvM,

Now 1 question on your EV/EBITDA valuation :

  • is there a reason why you did not include a comparable EV/EBITDA valuation ? It would have been consistent with your P/E valuation (which has historical as well as comparable).

And 1 question regarding a difference that I noticed between your FCF and EV/EBITDA valuation :

  • in your FCF valuation, you substract net debt to arrive at equity value

  • in your EV/EBITDA valuation, you substract net debt as minority interest and pension liability to arrive at equity value

May I ask why this difference in methods ?

#67

oops double post sorry

#68

I was running low on time and didn’t get to the EV/EBITDA. It would have been a nice touch.

What you found is an oversight on my part. As I said, I was running low on time and needed to review/format. Looks like I missed that point regarding equity value.

I’m going to start calling you the Excel K9 with how well you sniff out the dirt!

#69

Thanks for the kudos.

#70

+1.

#71

Hi CFAvsMBA - I’d highly appreciate if you could pls fwd your three statement model to rudykip7@gmail.com. Many thanks!

#72

Wow, lots of interesting stuff has happened since I’ve learned how to do 3-statement modeling.

#73

You’ve come so far :slight_smile:

#74

Things were never really the same after the Indian war of 2014.

#75

We lost a lot of good men out there.

#76

Tim Vipond from CFI came to my school (UBC) for a Financial Modeling Course, it was really good “bootcamp” I ended up taking their FMVA which was great for learning excel skills!

Heard BIWS and Wall Street Prep are good online options as well.

I think once you do one of these courses, you’ll have a good foundation. But as for learning I would say the best way is to actually sit down with a 10-K and build your model from scratch. Just my 2 cents

#77

Wall St Prep did it for me. Definitely worth the investment. Then just do more and more on your own and you got it.

Every shop is different as to how they want things modeled. Thankfully my current is fairly simplistic so we can focus on other things.