Developing the Projections for Your Business Plan

Introduction 

Developing the projections for the coming years based on the historical information available on the company aids in developing valuation for the company going forward. It provides analysis from which the company's ability to survive or remain profitable or improve its profitability is evaluated. Valuation of the stock of the company going forward is also made possible considering the projections provide a basis on which investors' base to make decisions on the future. In examining this element for Texas Roadhouse will start with an examination of the current income statement of the company, an evaluation of the possible elements involved in growth, a projection of the income statement and valuation of the company's stock going forward. 

Current Year Income Statement 

Generating the income projections of the company for the future requires that one obtains the income statement of the company for the current year. A comparison between income growths for the two previous years may provide a consistent income growth percentage useful in forecasting income growth that the company will record in the future. The evaluation below employed the consolidated income statement of Texas Roadhouse Inc for the years from 2014 to 2016. These were instrumental in determining the profitability of the company in 2017 (Texas Roadhouse, 2017). 

Possible Growth Elements 

The development of a forecast on income statement relies on projections made by various parameters employed on the current income statement values. The changes are evaluated using percentage changes, a percentage change in another line item in the income statement and line item specific changes. The percentage change will be essential in estimating changes in the major items related to sales. These include the revenues that the company registered the labor costs of the company and rent. The use of percentages of another line item will employ the base assumptions in making forecasts. These two will feature in the development of forecasts for Texas Roadhouse Inc. Applying these to the past performance of the company will aid in a forward looking analysis (Robinson et al. 2012). 

Projected Income Statement 

Establishing the forecasted income statement for the future covering a year reveals the below-provided incomes and expenses for the company. 

Based on the projections, it is estimated that the revenues of the company will grow with a 10% flat rate. The Total costs that the company will register in the coming year are also based on a various percentage with some based on the change in sales while others based on other line items that relate directly to them. Total cost and expenses are evaluated to grow with 11%. Income before taxes is also revealed to grow over the period with 5% while the resulting net income of the company is projected at 120,935 with a 5%. 

Valuation of the Stock Going Forward 

According to Mladjenovic, (2011), there exists a logical relationship between the performance of a company in the long term and the performance of stock. Companies that have a solid performance with continued profitability have a continued positive impact on the stock prices with continued rise compared to those that post negative profitability. The profitability of Texas Roadhouse Inc as revealed in the above-forecasted income statement will provide a positive effect on the stock price with possibilities of the price rising. The company remains attractive to the investors with increasing possibilities of them growing their returns as the company continues posting profitability. These will affect the demand of the stock in comparison to supply that increases the price. On the other hand, a decline in profitability indicates to a poor performance of the company to investors which affects the aspect of demand and hence continued decline in the company's stock price. The changes in the prices of the stock are also based on other factors besides positive profitability. These include information on the media about the company, the management efficiencies embraced, the strategic plan of the company that enables it to remain profitable for longer and the market conditions including competition. Entry of new competitors in the market may signal to a possible decline in profitability which may then affect the price of the stock. 

Conclusion 

The performance of the stock relies on the performance of the company as reviewed above based on the financial statements of the company for the previous years. Long term investments in stocks of a company require that one puts into consideration profitability as it indicates to positive development. It indicates to good management and use of resources available to the company for profitability. The use of percentage changes in the company reveals the possible forecast percentages or changes in items of the income statement that will provide the basis on which the changes in the income statement items is recorded. The above forecasts indicate to profitability for Texas Roadhouse Inc and hence possibilities of the stock of the company rising in price. Maintaining the profitability will ensure the company stock price continues to sore with other factors such as management efficiencies and competition considered to remain constant in favor of the development. 

References  

Mladjenovic, P. (2011). Precious Metals Investing for Dummies. John Wiley & Sons. 

Robinson, T. R., Henry, E., Pirie, W. L. & Broihahn, M. A. (2012). International Financial Statement Analysis. John Wiley & Sons. Texas Roadhouse, 2017. 2016 Annual Report.