This publication contains a set of very practical tools to describe, analyze, and forecast a company’s sales, profitability, and portfolio performance. They are accompanied by professionally designed charts to help communicate the outcomes and can be used for in-house analysis, the management, or shareholder reports, due diligence, or consulting assignments.
1) Describe and visualize a company’s actual performance
– Calculate the total, average, median sales and other statistics giving a full picture of the historic sales performance
2) Explain the basis of seasonality analysis
– Draw seasonality patterns on a cycle plot
– Analyze and forecast seasonality based on monthly data.
3) Identify the reasons for variations between the years or between the budget and actual (calculate the price, volume, and mix effects for the whole portfolio and by category).
4) Provide a scientific basis for making educated predictions of future sales and portfolio performance
– Build trends and explain why commonly used CAGR rarely gives reliable future estimates. CAGR takes only two reference points (beginning and end of analyzed period) and does not take into account possible fluctuations between those points. This section also explains how to tie volatilities to a timeline using standard error and make sensitivities based on that analysis.
– Measure historic volatilities and translate them into model scenarios with a desired level of confidence. In this part, we will calculate the standard deviation for quarterly data and see how it is extrapolated to annual amounts.