CFA L1 / Equity / M7. Company Analysis II
Module 7 · Equity

Company Analysis: Forecasting

EN: Top-down vs bottom-up, scenario analysis, and key driver projection.
VN: Tiếp cận top-down/bottom-up, phân tích kịch bản, dự báo theo driver.

1. Forecasting Approaches Concept

  • Top-down Macro → industry → company. Best for cyclicals, commodities.
  • Bottom-up Company-specific drivers up to aggregate. Best for differentiated stocks.
  • Hybrid Combine both — most analysts use this.

2. Revenue Forecast Drivers Concept

  • Volume × Price Most-explicit decomposition.
  • Market × Share TAM × penetration × share.
  • Same-store / new-store For retail/restaurants.
  • ARPU × Subs SaaS, telecom.

3. Margin & Cost Forecasting Concept

  • Variable costs Project as % of revenue.
  • Fixed costs Project in absolute terms with inflation.
  • Operating leverage Fixed-cost-heavy → margins expand on rising revenue.

4. Scenario Analysis Core

\[ E(\text{value}) = \sum_{i} P_i \cdot V_i \]

Common scenarios

  • Bull Best-case fundamentals.
  • Base Most-likely outcome.
  • Bear Downside / stress case.
Practice problem

Bull (25% prob, value $80), Base (50%, $60), Bear (25%, $35). Compute expected value.

Show solution
E = 0.25(80) + 0.50(60) + 0.25(35)
= 20 + 30 + 8.75
E = $58.75

Practice problem Practice

Practice problem

A SaaS company has 10,000 subscribers paying $50/month average. Management forecasts 20% subscriber growth and 5% ARPU growth. Project next-year revenue.

Show solution
Current annual revenue: 10,000 × $50 × 12 = $6,000,000
Next-year subs = 10,000 × 1.20 = 12,000
Next-year ARPU = $50 × 1.05 = $52.50
Revenue = 12,000 × $52.50 × 12
≈ $7,560,000 (a 26% increase)