The ability to calculate doubled changes in cash flows over a monetary period is very convenient and helps to convert these changes into an exchange price.

It's like a mathematical integral.

The market evaluates the future, so we double our integral of the past data.

This method will help us describe price fluctuations on the stock exchange based on various cash flow options.

The first option is simply based on dividends.

An example has already been given for Severstal.

Figure 1.

Next, we can do the same with the direct calculation of free cash flow. 

Figure 2.

Thus, we see that FCF looks good, but without dividends, the market does not want to appreciate it.

And we must remember that the amount of data for the past years is an average value that is always late.

The next step is to count up the FCF using indirect method.

First, we take the CF before changes in working capital.

Then we will need some balance sheet data.

The ratio between equity and balance sheet gives us the average value of net profit that is extracted from CF before the change in working capital.

So, the next step is to get an average Net Profit = CF * Equity / Balance Sheet.

Next, we need to get the Free Cash Flow from Net Profit.

The relation between working capital and balance sheet gives us the average distribution of Company’s cash.

So we can write down the formula.

FCF= Net Profit*Working Capital / Balance Sheet

FCF = CF * Equity / Balance Sheet * Working Capital / Balance Sheet.

Thus, we obtain the strictest definition of the average FCF obtained by the indirect method.

Let's show it on a graph.

Figure 3.

As we can see, this draws about the lowest prices on the bourse.

A strictly calculated FCF does not imply the possibility of obtaining loans.

And we can mitigate this by using the Working Capital/Liabilities ratio instead of the Working Capital/Balance ratio.

FCF = CF * Equity / Balance Sheet * Working Capital/Liabilities.

Figure 4.

Thus, we have created a new method for estimating the value of a stock, which describes and covers the entire range of price fluctuations.

This can help us navigate the turbulent space of stock prices.