In the Custom Screener, we provide a range of screenable forecast items (see our Glossary). However, we try to be selective in the Stock report in focusing on displaying the estimate items that are likely to have the most useful signal. This is because it is important to use analyst estimates carefully.
The broker estimates section of our Stock report shows detailed earnings forecast data and whether analysts have been increasing or reducing their forecasts on a 1 month and 3 month basis. The numbers are colour coded for quick review. Due to price anchoring, it tends to be a positive signal if forecasts have been repeatedly upgraded, and clearly a negative one in the opposite scenario.
- Price Target - This shows the consensus price target given by covering brokers. The numbers are at the discretion of each broker and tend to be on a 1 year timeframe. They should be used with caution.
- Brokers Consensus - These recommendation and targets should be taken with a pinch of salt. Due to the fact that many broking firms also provide corporate finance services to their clients, it has been shown that brokers are reluctant to put out 'sell' recommendations. The majority of stocks analysed in the city are 'buys' or 'outperforms', and much research has indicated that stocks with a 'sell' rating actually outperform stocks with a 'buy' rating. This indicator is provided for reference only, but can sometimes be used as a useful contrarian signal.
- Forecast Trend - The trend in forecasts is charted below the broker consensus. This shows how the current year forecast has changed over the last 18 months. Most investors soon learn that companies with a habit of beating forecasts tend to outperform the market. The reason is that due to a behavioural quirk called price anchoring, analysts tend to raise their forecasts too conservatively. This can lead to sequences of earnings upgrades and surprises which investors can take advantage of.