How to calculate growth rates.pptx

Calculating growth rates for a company to value is difficult if you don't know, what options do you have at your disposal. This simple presentation should help find a way through this difficult task. It should help find a growth rate you happy with when you do your due diligence before buying a stock. You can also use this approaches in other business context, whether it is for your own company or any purpose you might find. Happy to share!

1. Why and the how calculating growth rates? Why it is important? Revenue drives nearly all line items of your valuation wheter you forecast the balance sheet and revenue model, conduct a discounted cashflow analysis or all of it. How do you calculate it? Top down approach Bottom up approach How to calculate growth rates when valuing a company? 1 2 3

2. V enture capital Top down Sizing the market = TAM & determine market share Usage Calculation Bottom up V alue investing Software Historical performance Third party opinion Market research Fundamentals Usage Calculation How to calculate growth rates when valuing a company? 1 2 3 Different ways to calculate growth rates

3. 3 Bloomberg, S&P capital IQ, FactSet Software Company Third party Industry research Fundamentals Data from the company (10K, 10Q), Earningscalls, Guidance Analysts, Experts, CEOs, Investors Cosulting firms, IBISWorld etc… ”Advanced” ratios based on fundamental data 0% 100% 25% 50% 75% Examples Options Bottom up Approach Access A ccess = 100% -> fully, 0%-> no access Description V ery costly, about 15K per year and only available to business A vailable to everyone, shows the usually the most crucial variables of the business Analysts focus on EPS growth, a second necessary, always consider that those people have a financial interest as well You find information about markets in articles of consulting firms (BCG, McKinsey, Bain etc…). Dedicated industry research is otherwise costly, CAGR usually available A dvanced ratios (e.g.: sales to capital, ROE…), can become messy when inputs are negative, requires skill How to calculate growth rates when valuing a company? 1 2 3 How to calculate growth rates when valuing a company