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What it does

Collects and validates the four forecast variables that drive the 10-year FCFF projection. For each variable, the skill determines a start value (year 1), an end value (year 10 target), and a convergence curve type that controls the transition shape. The curve shapes library then generates a full 10-year schedule that is passed directly to the DCF engine.

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The four forecast variables

VariableStart value (Year 1)End value (Year 10)What it controls
Revenue growthLTM growth rate (or earnings guidance)Industry 5-year average growthTop-line trajectory and deceleration shape
Operating marginLTM EBIT margin (or earnings guidance)Industry average (or guided long-term target)Profitability convergence path
Sales-to-capital ratioCompany’s current ratioIndustry averageReinvestment efficiency evolution
Cost of capitalInitial WACC from Phase 5Risk-free rate + base ERPRisk premium decline as company matures
Each variable transitions from start to end over 10 years using one of six convergence curve types:
CurveShapeTypical use
Exponential DecayFast initial change, gradual tailRevenue growth decelerating as market saturates
Standard S-CurveFlat → rapid → flatMargins expanding after moat-protected growth phase
Rapid DecelerationVery fast convergenceLarge gap between current and target, fast normalization
LinearConstant rate of changeSteady, predictable transitions
Delayed DecelerationHolds near start, then dropsStrong near-term visibility (backlog-driven)
Step-DownFlat then discrete jumpMargin cliffs (patent expiry, contract loss)

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How schedules interact

The four 10-year schedules together determine every line in the projection:
  • Revenue(t) = Revenue(t−1) × (1 + growth_schedule[t])
  • EBIT(t) = Revenue(t) × margin_schedule[t]
  • Reinvestment(t) = ΔRevenue / s2c_schedule[t]
  • FCFF(t) = EBIT(t) × (1 − tax_rate) − Reinvestment(t)
  • PV(FCFF) = FCFF(t) / (1 + coc_schedule[t])^t

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Earnings guidance integration

When earnings guidance is available from Phase 5.5, it overrides LTM-derived defaults:
VariableWith guidanceWithout guidance
Revenue growth — startImplied growth from guided dollar revenueLTM growth rate
Operating margin — startGuided year 1 marginLTM EBIT / Revenue
Operating margin — endGuided long-term target (if given)Industry average
In Expert mode, guided values are presented alongside industry benchmarks — the user can accept, modify, or reject each one. In Lucky mode, guidance is applied automatically.

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Industry benchmarks

For each variable, the skill shows how the company compares to its industry:
MetricCompany (LTM)US AvgGlobal AvgQ1MedianQ3
Revenue growth✓✓✓✓✓✓
Pre-tax operating margin✓✓✓✓✓✓
Sales-to-capital ratio✓✓✓✓✓✓
ROIC✓✓✓———
Sources: Damodaran Jan 2026 industry averages (US and Global), Input Stat Distributions (Global). Company actuals computed from LTM SEC filings.

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Mode behavior

ModeHow variables are set
ExpertFull benchmark table shown, then all four variables presented with start/end/curve defaults. User overrides any values or curve types.
NoviceTwo story questions: “How fast will this company grow?” and “How profitable will it be?” Responses are mapped to the four variables using industry quartiles. Curves auto-selected.
Feeling LuckyFully automatic — start values from LTM or guidance, end values from industry targets, curves auto-classified. Zero questions asked.

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Curve auto-classification

In Feeling Lucky and Novice modes, curve types are selected automatically based on:
  • Direction: ascending (margin expansion) vs. descending (growth deceleration)
  • Gap magnitude: how far the start value is from the target
  • Company trajectory: recent trend direction and velocity
  • Industry context: whether the company is far outside industry norms
For example, a company with 168% LTM revenue growth converging to a 29% industry average would get an Exponential Decay curve, while a company with very low sales-to-capital ratio (0.17x vs. 1.35x industry) would get an S-Curve to model gradual efficiency improvement.

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Validation

After determining the schedules (in any mode), the skill flags unusual values: very high year 1 growth rates, negative target margins, very low or very high sales-to-capital ratios, or curves that imply implausible trajectories. In Expert mode, all flags require confirmation. In Lucky mode, flags are noted but the pipeline proceeds.

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Output

The skill saves growth_assumptions.json to the run directory, containing:
  • The four 10-year schedules (growth_schedule, margin_schedule, s2c_schedule, coc_schedule)
  • Curve type selections and metadata
  • Start/end values with source annotations (LTM, guidance, industry)
  • Industry benchmarks for comparison
  • Legacy scalar fields maintained for backward compatibility