8: Company Analysis—Forecasting

title: “Chapter 7: Industry and Competitive Analysis” type: docs nav_weight: 70000

In this section

• Principles and Approaches to Sales Forecasting
  Discover key quantitative and qualitative methods, real-world examples, and best practices to accurately project sales figures in equity analysis.
• Estimating Expenses, Margins, and Capital Expenditures
  Learn how to classify and forecast expenses, understand margin dynamics, and project capital expenditures to inform better equity investment decisions.
• Top-Down vs. Bottom-Up Forecasting Methodologies
  Explore two essential forecasting methods for equity analysis—starting with macroeconomic data or beginning at the product level—and learn how to reconcile them for robust financial projections.
• Scenario Analysis and Stress Testing
  Explore practical techniques for building scenarios, analyzing stress conditions, and integrating these insights into robust company forecasts.
• Sensitivity Analysis under Different Macroeconomic Scenarios
  Explore how changes in key macroeconomic variables—interest rates, GDP growth, inflation, and more—impact company forecasts and risk management strategies through sensitivity analysis.
• Forecasting Equity Dilution and Share Repurchases
  Explore predictive methods for changes in share count through new equity issuance, option exercises, and repurchases, and learn how to incorporate these adjustments into valuation and portfolio decisions.
• Forecasting Cyclical vs. Non-Cyclical Firms
  Learn how to adapt forecasting models for firms with varying sensitivities to economic cycles. Explore key indicators, margin of safety, and differences between cyclical industries and non-cyclical, defensive sectors.
• Using Monte Carlo Simulations in Forecasting
  Explore how Monte Carlo Simulations can enhance forecasting by modeling uncertainties, leveraging probability distributions, and interpreting probabilistic outcomes for more robust equity projections.
• Percent-of-Sales Forecasting Approach
  Explore how to build pro forma financial statements by modeling key expenses and assets as a percentage of projected sales, with practical examples and best practices.
• Data Collection, Integrity, and Common Pitfalls
  Learn how to gather, clean, and validate data effectively for forecasting while avoiding common mistakes in equity analysis.