Forecast Earning via Common Size Analysis

• From horizontal common size analaysis, identify
• Growth Rate for Revenue & COGS (Using few year average or CAGR)
• Identify the % of expenses in relation to revenue e.g. R&D, SG&A
• Identify fixed rate expenses e.g. SG&A, Depreciation
• And perform estimation on next year earning, e.g.
• 
  

  Revenues	Growth rate to be estimated
  Cost of sales	60 percent of revenues
  Research and development	8.3 percent of revenues
  Selling, general and administrative	Previous year SGA times (1 + (75 percent of the revenue growth rate)

References:-

• Using Common Size Financial Statements to Forecast Earnings - financial-education.com