Projections from 10k
I’m practicing building from scratch LBO models and want to start doing them from 10ks for real companies.
How do you guys go about coming up with projections (revenue, margins, NWC, CapEx, etc)?
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Typically financial statement projections stem initially from the forecasted income statement. Then project balance sheet and statement of cash flows based upon the assumptions made on the income statement.
Is a forecasted income statement provided somewhere I’m not seeing?
My plan is to common size everything to revenue, is that a reasonable plan? If so, how do you project revenue? Do you just base it off of historical growth rates for revenue drivers?
If you’re a student you can look at analyst projections if your school has them through Refinitiv or CapIQ or something similar.
Comparing all entries to Revenue is typically unfavorable under most circumstances since not all costs scale linearly with revenue. For example, fixed costs such as R&D in the software space are high while their marginal cost is low. It would be unlikely line items like COGS would scale linearly with revenue if the ongoing development/maintenance costs per unit were lower than the marginal revenue per unit.
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