How to Forecast operating profit margin for service companies?
How can we forecast segment operating profit margin for service companies which have multiple segments? Is there any way to forecast using historical operating margins? For example, if need to forecast operating margin for 4th quarter, is it okay if i calculate it by averaging operating profit margins of last 3 quarters? And if i need to caclulate annual operating profit margins, can i calculate it by averaging annual operating profit margins of last 3 years?
Shokhrukh_96, sorry about the lack of response. Maybe one of these topics will help:
If we're lucky, the following pros may have something to say: Dollarfor60Cents ModelThis Beth-Reed
Hope that helps.
For simplicity's sake, yes you can just average the past to look into the future, especially if you don't expect big changes in business mix or operational improvements.
If you are betting on a change in mix of business revenues or margin improvement in a segment, you should break down the margins for each segment and create a blended average.
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