Got it — let’s build a Revenue Analysis Framework that you can use in equity research or
financial analysis. I’ll break it down into layers so that it’s structured, detailed, and prac cal.
Revenue Analysis Framework
1. Top-line Overview
Defini on: Revenue (or Sales/Turnover) is the total inflow of economic benefits from
opera ng ac vi es.
Key Ques ons:
o What is the absolute revenue size?
o What is the growth trend YoY / QoQ?
o Is growth driven by volume, pricing, or mix?
2. Revenue Breakdown
Revenue is usually split into different dimensions:
a) By Product / Segment
Contribu on of each product line or business segment.
Iden fy star segments (fastest growing) vs lagging ones.
Example (ACE Ltd.): Cranes, Construc on Equipment, Agri Equipment, Engines.
b) By Geography
Domes c vs Export.
Contribu on from high-growth markets.
Check for currency fluctua on impact on exports.
c) By Customer Type
B2B vs B2C.
Large enterprise clients vs retail buyers.
Revenue concentra on risk (Top 5/10 customers contribu on).
d) By Pricing & Volume
Price effect: Was growth driven by higher realiza ons (ASP)?
Volume effect: Was growth driven by higher units sold?
Helps isolate whether growth is sustainable or just pricing-led.
3. Growth Analysis
a) Historical Trend
3Y / 5Y CAGR of revenue.
Seasonal pa erns (e.g., construc on ac vity peaking in certain quarters).
b) QoQ vs YoY Comparison
YoY growth = Long-term momentum.
QoQ growth = Short-term cyclicality.
c) Organic vs Inorganic Growth
Organic: Same opera ons, new customers, pricing improvements.
Inorganic: Acquisi ons, M&A, JV contribu ons.
4. Quality of Revenue
Not all revenue is equal. Analyze:
Recurring vs One- me: (Subscrip on/service contracts vs one-off projects).
High-margin vs Low-margin products: Growth in low-margin segments may not improve
profitability.
Cash vs Credit sales: Check DSO (days sales outstanding) to ensure revenue isn’t inflated by
loose credit terms.
Related-party sales: Verify if revenue includes sales to group companies.
5. Compara ve Analysis
Compare growth vs industry peers.
Benchmark market share gains/losses.
Iden fy whether growth is structural (industry tailwinds) or company-specific (compe ve
advantage).
6. Forward-looking Indicators
Order book / backlog: Visibility of future revenue.
Capacity u liza on: Is there room to scale?
Guidance vs Actuals: Check management’s revenue guidance and track execu on.
Macro drivers: Infrastructure spend, capex cycles, regulatory changes, commodity prices.
7. Red Flags in Revenue
Abnormal spike in receivables vs sales growth (possible channel stuffing).
Frequent change in revenue recogni on policy.
Over-reliance on government contracts (payment delays).
Heavy dependence on 1-2 customers.
8. Key Ra os
Revenue CAGR (3Y, 5Y).
Revenue per employee (produc vity).
Revenue per asset (asset efficiency).
Revenue diversifica on ra o (Top 3/5 segments % of total revenue).
Final Deliverable (Summary for Equity Research Report)
Start with headline growth numbers (YoY, QoQ, CAGR).
Break down into segmental / geographical drivers.
Comment on quality (recurring vs cyclical, margin profile).
Benchmark vs peers and industry growth.
Add forward-looking drivers (order book, guidance, macro tailwinds).
Highlight risks and red flags.
Would you like me to make this into a structured PDF (like a one-page equity research tool) so you
can directly a ach it to your research reports?
