Online Tutorial #2: How Do You Estimate A Company’s Sales and Sales Growth Rate?
As we discuss in the book, sales growth is often the value trigger that has the greatest impact on shareholder value. This session focuses on where you can find historical sales figures and projected sales growth rates. We will use Domino’s Pizza, as of September 2020, as a case study.
Where Can I Find Historical Sales Figures?
You can find historical sales figures at several sources:
Company web sites. The investor relations section of a company’s website often provides detailed information on historical results. For example, the investor relations section of Domino’s Pizza’s website can be accessed here. The site includes a link to SEC filings. Here you can find the most financial data in the forms 10-K (annual report) and 10-Q (quarterly reports).
Value Line Investment Survey. Value Line provides online subscriptions that offer historical and projected quarterly and annual sales data. Value Line is often available at your local library.
How Do I Project Future Sales Growth Rates?
While this is harder to get, you can start your search for a company's projected sales growth rates in several places:
Company web sites. Companies commonly publish their guidance for future financial metrics when they report quarterly earnings or in investor presentations. Search a company's investor relations website to see if the company provides guidance. For example, Domino’s Pizza offers multi-year guidance for sales growth here.
Value Line Investment Survey. Value Line is available via online subscriptions and through many local libraries. Click here to see how to read an Investment Survey using Value Line for a specific company.
For detailed information on how to translate Value Line Investment Survey analysis for Domino’s Pizza into sales forecasts that we can use in our analysis of price-implied expectations, you may wish to download this file.
Morningstar. Morningstar provides subscribers with quantitative and qualitative analysis of companies. These include a moat rating, which provides some sense of their assessment of sustainable competitive advantage. Here is an example of analysis for Domino’s Pizza.
Other useful sites include Koyfin, Zacks, roic.ai and Yahoo Finance.
Case Study: Domino’s Pizza, as of September 2020
For our Domino’s Pizza case study, we combine our own analysis, analyst reports, and Value Line forecasts to assess a range for Domino's likely sales growth rate. We estimate the price-implied expectations reflect sales growth of 7 percent.
Our low scenario of 3 percent sales growth assumes that Domino's store growth and same-stores sales both in the U.S. and internationally are below historical standards and company guidance.
Our high scenario of 11 percent sales growth reflects double-digit sales growth in the U.S. and internationally, consistent with a rapid rate of store growth and healthy same-store sales gains. Sales for the supply chain business would grow in line with the U.S. business.