Chapter 50. Modeling Exponential Growth
Question answered in this chapter:
How can I model the growth of a company’s revenue over time?
If you want to value a company, it’s important to have some idea about its future revenues. Although the future might not be like the past, you often begin a valuation analysis of a corporation by studying the company’s revenue growth during the recent past. Many analysts like to fit a trend curve to recent revenue growth. To fit a trend curve, you plot the year on the x-axis (for example, the first year of data is Year 1, the second year of data is Year 2, and so on), and on the y-axis, you plot the company’s revenue.
Usually, the relationship between time and revenue is not a straight line. Recall that a straight ...