top of page

Earnings Estimate

Updated: Apr 26

An earnings estimate is an analyst's estimate for a company's future quarterly or annual earnings per share (EPS). Future earnings estimates are arguably the most important input when attempting to value a firm. By placing estimates on the earnings of a firm for certain periods (quarterly, annually, etc.), analysts can then use cash flow analysis to approximate fair value for a company, which in turn will give a target stock price.


Investors often rely on earnings estimates to analyze different stocks and decide whether to buy or sell them.


Analysts use forecasting models, management guidance, and fundamental information on the company to derive an EPS estimate. Market participants rely heavily on earnings estimates to gauge a company's performance. So whether a company meets, beats, or misses its earnings estimates can impact the price of the underlying stock, particularly in the short term.


Analysts' earnings estimates are often aggregated to create consensus estimates. These are used as a benchmark against which the company's performance is evaluated. When you hear that a company has "missed estimates" or "beaten estimates," it's usually in reference to consensus estimates.


A few companies, such as Refinitiv and Zacks Investment Research, compile estimates and compute the average or consensus. Their forecasts can be found in stock quotations or financial publications such as The Wall Street Journal. Consensus numbers can also be found at a number of financial websites such as Yahoo! Finance, Bloomberg, Visible Alpha, Morningstar.com, and Google Finance.


Source: Investopedia, Earnings Estimate: Meaning, Examples and Considerations, accessed 26 December 2023, <https://www.investopedia.com/terms/e/earningsestimate.asp>

6 views0 comments

Recent Posts

See All

Beta

Beta (β) is a measure of the volatility-or systematic risk-of a security or portfolio compared to the market as a whole (usually the S&P 500). For beta to provide any useful insight, the market that i

Earnings Surprise

An earnings surprise occurs when a company's reported quarterly or annual profits are above or below analysts' expectations. These analysts, who work for a variety of financial firms and reporting age

Earnings Per Share (EPS)

Earnings per share (EPS) is calculated as a company's profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company's profitability. It is comm

Comments


bottom of page