Scenario analysis
Also called: bull and bear case, bear base bull
Valuing a business under several complete, internally consistent futures, such as bear, base and bull cases.
Each scenario changes several assumptions together in a way that fits, for example lower sales with lower margins. Weighting scenarios by rough probabilities gives an expected value, but the spread of outcomes matters as much as the average.
Learn more in these lessons
- Sensitivity and scenario analysisHow do you show how uncertain a valuation is?
- Building scenarios from assumptionsHow do you value a company when the future is uncertain?
- Writing an investment thesis and research reportHow do you turn research into a clear written thesis?
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