Investment exercise questions

Great, in that case, you should definitely be breaking down by division.

My instinct would be to grow each division by the forecast growth rate of the market, plus some surplus which begins at the historic surplus of company growth over market growth, and converges towards zero over time. For example, suppose the crutches market grew at a CAGR of 4% from 2018 - 2022, and your company's division grew at 7%. Suppose for simplicity that market growth is forecast at 3% from 2022 - 2026. Then I'd begin your company's crutches growth at 6% (=3% market forecast growth + 3% historic surplus), and bring the historic surplus gradually down over time (maybe this is as simple as reducing it by 25 / 50bps p.a.).

The reason for bringing your company's growth surplus down over time is that, if you didn't, your company would in theory grow to be larger than the market it operates in, which doesn't make sense.

The surplus growth we're baking in here (the 3%) should already capture new customers, new products, market share growth, etc., so we don't need to do this separately, else we'd be double-counting. There might be some growth levers to consider (e.g. if your company is entering the European market and previously had only been operating in the US), but I'm assuming that that's not the case.

Inside a company, a practitioner may well forecast specific product lines and customers one-by-one, but I presume you don't have the kind of information to be able to do this.

Finally, on revenue, you may be able to split growth by volume and by price / mix. If you don't have that kind of data to begin with, then it's difficult for you to do that.

As for EBITDA growth, I don't know how much information you have in your financial statements, but you should try to forecast by line item again. Conservatively, your COGS should stay broadly constant as a % of Sales. You could argue that they decrease slightly as your company grows through scale economies and procurement savings, but this is an aggressive assumption. Note that since you have multiple divisions you should be forecasting COGS by division if you have the information to do so.

Then you may have a number of other line items like SG&A, utilities, etc. For these fixed costs, you can probably grow them by inflation, perhaps with a slight uplift above that (a company can't 10x in size and realistically keep the same number of admin staff).

This should enable you to come up with a sensible idea of how EBITDA moves over time (we'd expect margins to improve as the company benefits from operating leverage over time; that said, your company has a few different divisions. If a lower gross margin division if growing at a faster rate than higher gross margin divisions, then the mix change might dilute EBITDA (and gross) margins over time).