Overheard in a meeting. "Don't put in too much detail in the 5 year financial forecast. It can never be accurate anyway, and you run the risk to wake up that annoying junior analyst who has not said anything the entire meeting, and let her zap the entire momentum of the pitch"

Agree, super precise forecasts 5 years out can never be correct. But:

  • A consistent 5 year P&L with realistic margins and marketing spend is a sign that the company knows what it is getting itself into. It is not a test of accuracy, it is a test of management competence.
  • Analysts can look junior, but could actually be reasonably senior in an investment organization. Or, even if the analyst is junior, convincing rather than bypassing them is a required hurdle in the investment process. "Hey Sally, did their financial planning make sense? You looked at it right"
  • Maybe it is actually good news that the analyst did not ask a lot of questions about the other content in the presentation.

Image: Promotional photo of the cast of the CBS television series Whiz Kids


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