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New Feature: Interactive Charts with Projected Peter Lynch Earnings, Analysts’ Estimates, and Forward P/E Charts

November 11, 2014 | About:

We are pleased to release a new feature for Interactive Charts. We have added analysts’ estimates of company’s revenue and earnings on the charts. From the analysts’ earnings estimates we have also calculated the forward P/E and the values are drawn on historical P/E chart. Furthermore, we have calculated the Peter Lynch Earnings Line for future years. Our users can also check the future projected prices based on the estimates of analysts.

Here are some examples:

1. Revenue and Earnings Line

This is the revenue and earnings line chart for Wal-Mart (NYSE:WMT). From this chart you can see the estimates of analysts on Wal-Mart’s sales and earnings for the years from 2015 through 2017. The area in yellow color is from the estimates.

1415736064958.png

The growth of the sales and earnings for Wal-Mart is quite consistent. But for company like Geospace Technologies (NASDAQ:GEOS), the changes of revenue and earnings can be quite dramatic:

1415736576868.png

Investors can benefit at least in two aspects from this and do future study:

  1. The chart will help you to recognize that the current growth trend for the company many not continue
  2. The revenue and earnings may still recover

2. P/E Chart

We have also calculated the forward P/E ratio based on the estimates of earnings per share and added it to the P/E (ttm) chart. Therefore the P/E (ttm) chart for GEOS now include both historical P/E and the forward P/E, as below:

1415737297018.png

We can see that although GEOS has quite low P/E of single digits right now, its future P/E is actually much higher due to the dramatic decline of future earnings.

This can serve as a very useful warning sign for investors.

3. Peter Lynch Earnings Line and Projected Future Prices at Fair Valuations

Since now we have some idea about future earnings, we can extend Peter Lynch Earnings Line to the future. The example we show here is from IBM (NYSE:IBM). Peter Lynch Earnings Line for IBM can now be drawn into Sept. 2016. If the analysts’ estimates are any guide, IBM’s earnings are expected to be back to its long term trend. At the current prices, IBM stock will be far below its long term earnings line. Therefore most likely that the stock price will not stay as low as it is today.

1415737966028.png

The chart also allows you to draw the earnings line at customized P/E ratios. For instance, in the case of Cognizant Technology (NASDAQ:CTSH), if the stock price stays in the vicinity of its 10-year median P/E ratio of 26 over the next two years, the upside potential for the stock can be as much as 60% in the next two years:

1415738448019.png

When using these charts please keep in mind that it is very normal that analysts make wrong estimates. But adding these indicators does provide a headup if you have missed this in your own research.

We hope you like this new feature. Please let us know if you have any comment. Please leave the comments below.

The unlimited use of Interactive Charts is for Premium Members only. If you are not a Premium Member, we invite you for a 7-day Free Trial.


Rating: 4.3/5 (6 votes)

Voters:

Comments

oxana999
Oxana999 - 4 years ago    Report SPAM

What is the difference between the earnings line having P/E = 15 and Peter Lynch Fair Value Price?

See this example http://www.gurufocus.com/chart/LVS#&serie=,,id:custompe,s:LVS,,id:lynchvalue,s:LVS&log=1&per=0

The fair value line is much greater than the P/E at 15

gurufocus
Gurufocus premium member - 4 years ago

Peter Lynch Fair Value is calculated at PEG=1. Therefore for companies that grows faster than 15, the fair value is greater.

Daniel Seens
Daniel Seens premium member - 4 years ago

Where exactly is the analyst data coming from? Thx.

gurufocus
Gurufocus premium member - 4 years ago

Morningstar collected the analysts data.

cjanders
Cjanders premium member - 4 years ago

i don't see these additions on Peter Lynch screen and I am a premium member?

paulmenezes
Paulmenezes premium member - 4 years ago

How do we find this addition?

Have spent a good amount of time trying to find it.

gurufocus
Gurufocus premium member - 4 years ago

@Cjanders @Paulmenezes go to Interactive Charts page like this: http://www.gurufocus.com/chart/WMT#&serie=,,id:pettm,s:WMT, you will see the yellow part.

James909
James909 - 4 years ago    Report SPAM

I am not getting any analyst estimates on any charts. I am also a premium member.

are they supposed to be there by default? Or do you have to add them from the options menu?

paulmenezes
Paulmenezes premium member - 4 years ago

I don't understand.

It's still not loading any estimates.

Is there not a way to find this in the interactive charts?

gurufocus
Gurufocus premium member - 4 years ago

@james909 @Paulmenezes: There is no additional button to click. Go to Interactive Chart page like this:

http://www.gurufocus.com/chart/WMT

Then click on series "P/E (ttm)" you will see it.

Not every series have it.

joegillespie
Joegillespie - 4 years ago    Report SPAM

You took a good tool and ruined it. I bought into this site because it gave me the tools to be my own analyst. Now I am expected to do extra work to sort out the stuff I joined this site to avoid. Additionaly, what is the point in adding this garbage when your disclaimer states "When using these charts please keep in mind that it is very normal that analysts make wrong estimates."?

Respectfully,

Frustrated Customer

gurufocus
Gurufocus premium member - 4 years ago

@joegillespie,

could you please be more specific? what can we do to meet your expectations?

Thank you for the feedback!

Cogito
Cogito - 4 years ago    Report SPAM

JoeGillespie has a good point - I understand him very well and I am surprised that you don't. I would like to make the following recommendations how incorporating the analyst estimates into the charts could indeed be a welcome addition (at the moment, I don't like them):

a) I want to base my buying and selling decisions on facts and not on estimates coming from some anonymous analysts. Analysts are always biased (e.g. sell-side analysts are differently biased than buy-side analysts). Analysts don't have skin in the game, so it doesn't hurt them if they are wrong - that's the reason why we focus on gurus and not on the analysts. I bought into gurufocus because the mainstream sites focus too strongly on analysts and I want to get rid off that. I believe that JoeGillespie was trying to tell you exactly this by his comment.

b) It's extremely difficult not to be influenced by a chart showing optimistic analysts estimates. And I have no way to get a feeling how valid the extrapolations are that you buy from Morningstar. Hence, I would like to be able to turn off the analysts estimates completely and only see them if I consciously request them (in this case, the extrapolation would be a welcome addition!). So, please could you add the feature to switch off the extrapolation?

c) In most parts of the gurufocs page, it is not possible to see where the facts end and where the extrapolation begins (e.g. in the summary page, or in the charts in the screener). As far as I can see, only the charts in the dedicated charting module show the yellow background under the estimates. So, please at least make visible everywhere where facts end and fiction starts - not only in the dedicated charting page.

P.S.: Please don't view this post as analyst-bashing. There are some very good analysts out there, but I feel that simply taking an estimate or the mean of several estimates is dangerous. I like to read good analysts reports, but I always want to know who the analyst is working for and why he wrote it to put the report into context. And I don't focus on the analysts' price estimate but on his textual analysis. Just using an price estimate without understanding the thesis is something I strongly want to avoid.

rrurban
Rrurban - 2 years ago    Report SPAM

You guys have no clue how analyst estimates work! Let me educate you so you can stop placing blame where it doesn't belong

Analysts that follow a stock will speak with mgmt, talk with suppliers, customers and look at industry trends to come up with an earnings estimate for each quarter as well as F1 and F2. F1 being 1 year out, F2 is 2 years out. They revise estimates upward or downward as new information surfaces. Mostly, they listen to mgmt earnings "guidance" and just update their models. Analyst estimates are NOT biased because a large part of an analysts pay is in the form of bonuses based on their earnings estimate accuracy. So they actually DO have skin in the game. You are referring to analyst stock ratings (buy, hold sell), and yes you are correct, these are biased due to numerous factors (investment banking mostly).

If 10 analysts are following the same stock you will typically see 10 earnings estimates. I/B/E/S started calculating consensus estimates in 1978 and Zacks started in the 1980s or so. These are the two main firms that calculate consensus estimates (average earnings estimate). The consensus is updated every Saturday morning and sent out to database subscribers (of which I am one of them thus why I know how this works). The consensus estimate (average) is the important data point that investors are looking at when the company reports earnings next quarter, and is a reason a stock will go up or down during quarterly conference calls. But, the even bigger reason a stock moves is forward earnings estimate revisions (up or down) because stocks discount the future.

Regarding earnings estimate accuracy, humans are fallable and so are earnings estimates. You should never place a large degree of confidence in earnings estimates for most companies, but NOT all of them. Earnings estimates can be used to determine trends, and when used in conjunction with past trends, return on invested capital, etc you can get a comfort level in what a company is actually worth (valuation), and VALUATION is all that matters. But, to determine valuation you MUST be able to predict the future to a large degree of accuracy. So, if you wan't to really be a successful investor, you need tools that help you predict the future. If all you're doing is looking at past earnings then you're looking in the rear view mirror and the future is out the windshield. Bottom line: earnings estimate are a great tool in your toolbelt to arrive a company valuation. Make sense?

I'm not an analyst or Wall Streeter, just a private investor who sold a business and then educated myself how to invest since I'm a control freak and won't allow others to do it for me. If you want to be truly successful in investing then I suggest you look deeply into earnings estimates because they are magic at making you money if you are smart about it and know what companies to focus on.

Warm Regards
Rob Urban

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