Great Expectations: Forecasting Sales Growth

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Predicting a company's top line growth is arguably the most important part of determining its stock growth. Unfortunately, unless you are a company insider with accurate order and shipment data, it's awfully difficult to know precisely how many products a company will sell in, say, the next five years. However, by working through a few key questions, investors can improve the accuracy of their guesswork: How quickly is the market for the company's products growing? What is the company's share of the market? Is the company likely to win or lose market share?. Market Growth 
Take some time to examine the market growth rate. Is the company doing business in a mature market or a growth market? Let's say you are trying to gauge the future growth of consumer product giant Proctor & Gamble. It's worth remembering that the market for P&G's goods is fairly mature, which means that it probably won't be growing much faster than the overall economy or the GDP. Players in the technology industry typically operate in faster growth markets. Take, for example, Apple. Less than a decade ago, Apple was known only for computers, but now it has an authoritative grasp on the phone and tablet market. To get a sense of their prospects, you need to estimate the percentage of people who already have smartphones, the percentage of new smartphone buyers and the percentage of customers who Apple may be able to grab from competitors in the years to come.  ... Continue to read.

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