Growth and forecasting

Backlog

The value of orders received but not yet delivered or recognised as revenue; a forward indicator of the next several quarters of sales.

Book-to-bill ratio

Orders received in a period divided by revenue billed in the same period; above 1 means the backlog is growing, below 1 means it is shrinking.

Constant currency

Growth recalculated using last year's exchange rates, so that currency moves do not distort the underlying performance of foreign operations.

Estimate revision

Analysts changing their forecasts after new information; the direction and breadth of revisions often matters more than the level of the estimate.

Guidance raise

Management increasing its own forecast for the current quarter or year, the single most reliably positive event in an earnings release.

Incremental margin

The change in operating profit divided by the change in revenue; how much of each new sales dollar drops to the profit line.

Organic growth

Growth from the existing business, excluding revenue added by acquisitions and removed by disposals, and often excluding currency effects too.

Run rate

The most recent period scaled up to a full year, as if that pace continued unchanged; useful shorthand and an easy way to mislead.

Sequential growth

One quarter compared with the immediately preceding quarter; the fastest read on a turning point, but heavily distorted by seasonality.

Total addressable market

The full revenue opportunity if a product were sold to every possible buyer; the ceiling a growth story is measured against.

Year-over-year growth

A period compared with the same period twelve months earlier, which removes seasonality and is the default growth measure in company reporting.

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