The Best Way to Confidently Forecast Revenue for Valuation

Hey, let’s understand how we can make assumptions for revenue based on the analysis of what industry is giving growth, what management expects on revenue growth, and what the street analyst expects for future income. We will understand all of this. As of now, I was valuing Page Industry Limited who have the exclusive license of the JOCKEY brand for manufacture, distribution and marketing in India, Sri Lanka, UAE and other places. JOCKEY is the premium innerwear for men, women and children with good quality and also the company has exclusive license for Speedo Internation for sports, swimwear and other segments.

Historical Growth:

I will start with a historical revenue analysis of the company and how the company performed in the past, and I will assess the company.
We can take the median of historical revenue growth but it depends upon the stage. At this stage, the company is suffering. Historical growth can work for almost mature companies.

To read Zomato Growth Analysis from here

Growth Drivers:

To identify the key growth drivers, we need to look at various factors that could influence the company’s future performance. This includes evaluating market trends, customer demand, competitive positioning, and any external economic or regulatory influences that may impact the company’s revenue streams. Understanding the extent to which each driver contributes to revenue generation helps in forming realistic assumptions about growth. By analyzing these elements, we gain a clearer picture of how the company can leverage its strengths, address potential weaknesses, and capture new opportunities in the market to fuel its long-term growth. Use this technique that to analyses the Growth drivers of revenue.

Industry Analysis:

After assessment of the Growth Driver understand the industry. In which industry the company is doing business? In my case “Apparel & Textile Industry So analyse the industry of what CAGR growth will be Globally and in India Prosperous. Use the various sources on open-source (Google).

Management Expectations:

Who can make assumptions about whether the company will Grow or not? it’s simple, the company management, Who is involved in day-to-day business transactions? They can make pure assumptions that how much the company will grow in the future. Yes, I can say that the management can’t say exact value but management can tell the assumption on a experience basis. So, in India, the company always holds a press conference where the various Research Analysts come and ask questions about the company’s business and recent performance and after this conference, the company publishes the con-call report every quarter. I can go and read the con-call and understand about the all things that management Expectations.

Street Estimation:

Street Estimation is nothing that the Equity research report which has already been published by various Research analysts for free. That is called a buy-side report. Where the analyst researches the company with a details analysis and then gives the target of share price to the public domain. I can check the Equity research report to understand what the analyst expects for the future and now, at the end of these analyses, we make assumptions about how much the growth rate I can give for revenue. Obviously, for valuation, we need to forecast for 10 years. So firstly, we give high growth to the first 5 years and and then will reduce the industry’s future growth as per analysis but remember it depends on the stage. 

Thank you for reading my content on revenue growth assumptions.

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