I am relatively new to modeling and working on an assignment. Hoping some experienced banking analysts can help me out with this problem.
I have been asked to do an analysis on a company and all I have is an I/S and B/S with 3 years historical info ( year end 2008, 2009, 2010). I also have Q1 2010 and Q1 2011 numbers for the I/S & Q1 2011 numbers for the B/S. The firm has negative revenue growth from 2008 to 2009 (-30%) and 2009 to 2010 (-15%). From Q1 2010 to Q1 2011 the firm's revenue growth is -5%.
My question is what assumptions should I use for building out forward looking projections in terms of revenue growth rates? Should I assume no growth? Hold the -5% number from Q1 2010 to Q1 2011 constant? Obviously this is an important first step because I need to tie other line items (COGS, SG&A, depreciation, etc) to revenue. Please advise. Thanks.
EDIT: Also, is it possible to build a historical cash flow statement given the info I have? Or should I just focus on a projected cash flow statement?
I had to do something like this last year for a summer gig
You need to analyze a few things...
Obviously if everything remains constant assume -5%.
What I ended up doing was having 3 different projection forecasts for revenue growth. So in you case I did a -5% growth, 0% growth, and 5% growth (something of that sort). Took me 2 seconds once I had a template built out. Sent it to the associate and picked out a reasonable growth rate.
It's all about what the company does, what you think their market is going to do, etc. Management should have their own projections, start with those and then figure out whether you think they are viable or not, based on qualitative factors.
If the Company is public, you can look at research to get a view as to what analysts are thinking, however from your post I'm assuming it isn't public so one thing you can do is look at research of any public peers and see how analysts are projecting growth there. You can also look at research for end market growth rates (see if you can get some industry reports... maybe even a news run will turn up a number).
This is very helpful, thank you all.
@oldmansacks - Anything special you did to build out the 3 different projections as far as making it look good in excel? Just looking for tips so I don't have to re-invent the wheel.
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