Take-home stock pitch with a model test: Brassvale Engineering has an order book of 2.4 years of revenue, 140 days of working capital and a 13% EBITDA margin. Build three years of EPS and cash flow and decide whether the order book converts to cash.

The order book converts to revenue and profit, but barely to cash. EPS rises from about Rs 11.5 to Rs 16.3 over three years, yet free cash flow totals only about Rs 56 crore against Rs 416 crore of net income, because 140 days of working capital absorb most of the growth. At 20x earnings the free cash flow yield is about 0.5%. The pitch works only with a credible path to fewer working capital days.

Think of a tailor who takes a wedding order in January, stitches through March and is paid in June. The order was real in January; the money arrived six months later, and the cloth was bought in February. For a project business, revenue is booked as work is done, and cash arrives only when the customer pays, often months after. Brassvale's 140 days of working capitalMoney tied up in running the business: receivables and inventory, less what the company owes its suppliers. are that gap, measured across the whole company.

Now scale that up. The gap is constant for one order, but a growing company takes more orders every year, so the gap grows with revenue. Working capital rises by 140/365 of each year's revenue increase, about 38 paise for every extra rupee of sales. That is the line a take-home model is really testing.

Build it line by line: revenue at 15% growth, EBITDA at 13%, depreciation, interest on opening net debt, tax, then the cash lines. Free cash flow is net income plus depreciation, less the increase in working capital, less capex. The model shows EPS compounding at about 19% a year, which is what a pitch deck would lead with, and free cash flow stuck in the tens of crores.

Operating cash flow over three years is only about 30% of EBITDA, because tax, interest and the working capital build all come out before a rupee is free. At Rs 231 the stock is 20x earnings but about 0.5% free cash flow yield, so the buyer is paying for profit that stays locked in receivables. A long pitch needs a mechanism that brings the days down: milestone billing on new contracts, customer advances, or faster commissioning. If you cannot find one, the honest pitch is that EPS growth overstates value creation, and the one number to track each quarter is working capital days, not the order book.

Say the limitation too. The model holds margin flat and treats all working capital as receivables and inventory in proportion to revenue; in reality retention money is released in lumps at project close, so free cash flow can jump in a year when several large projects finish. That is a reason to ask for the ageing of receivables, not a reason to trust the EPS line.