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This step of the discounted cash flow (DCF) analysis turns raw historical financials into the value drivers that explain how a business actually creates value. The video demonstrates how to calculate revenue growth rates, gross margin, operating margin, tax rate, working capital as a percent of sales, and capex as a percent of sales across three to five historical years. Laying these ratios out side by side reveals the company's underlying trends and operating profile, giving you the empirical basis you need before making forward-looking assumptions in the next step.