What does a full free-cash-flow forecast look like end to end?

Let's assemble the unit into one clean, explicit forecast — the exact stream of numbers the discounting machinery of the next unit will consume. No new theory here, just the pieces put together the way a practitioner lays them out.

The recipe, in order

1. Find normal free cash flow. From several past years of operating cash flow minus capex, pick a representative "normal" figure. Say €350.
2. Choose a horizon. Five years is common for a stable company; faster-changing businesses sometimes use ten. We'll use five.
3. Choose growth. One rate, defensible from history and peers. We'll use 8%, fading in spirit toward the economy beyond the window.
4. Project. Grow the normal figure forward across the horizon.

The forecast on one page

Starting from €350 at 8% growth:

• Year 1: €378
• Year 2: €408
• Year 3: €441
• Year 4: €476
• Year 5: €514

Five numbers. Each is just €350 compounded — but now they're written down, arguable, and ready to be discounted. This is the "explicit forecast period" of a DCF. Everything after year 5 gets bundled into a single terminal value (the whole subject of the next unit), because forecasting individual years that far out is more fiction than analysis.

Three checks before you trust the five numbers

A practitioner reads a forecast back before discounting it, and three questions catch most of the bad ones. Does the history support the rate? 8% for five years is +47% cumulative; if revenue grew 3% a year over the last five, the forecast is quietly assuming a company that does not yet exist. Where does the growth come from? Free cash flow rises only if sales rise or margins widen, and both have a ceiling; a forecast that names neither is a number, not a claim. Is it paid for? Growth needs reinvestment, so capex should climb with the cash flow; if the projection holds capex flat while cash flow adds €164 by year 5, the growth is arriving free, and free growth is the first thing a sceptical reader deletes.

What you're holding

Notice how little a real forecast contains: a normal starting figure, a horizon, and a growth assumption or two. The output looks sophisticated, but it's built from a few honest inputs — which is exactly why the last unit stresses that the inputs, not the arithmetic, decide the answer.

Try it now

1. Read the whole series: operating cash flow, capital expenditure and free cash flow, five years of it for Apple, newest first:

To build the forecast for a company you understand better, open it in the Terminal instead; the link opens Apple and you change the symbol:

Open AAPL.US — fundamentals in the EODHD Terminal

2. Line up the last five years and settle on one "normal" free cash flow figure. Discard the year with the one-off factory build or the tax quirk — a DCF built on one weird year is a DCF built on sand.
3. Apply a single growth rate you can defend and write out the five forecast years. Keep this on paper; the next unit discounts exactly these numbers.
4. Note, in the margin, the two inputs that most shaped your five numbers — the starting figure and the growth rate. When the value surprises you later, these are the first suspects.