Wednesday, September 25, 2013

Use of Estimates

I use estimates for looking at some aspects of valuing the current stock price. I think that is valid as stock prices tend to move depending on what investors think that the future holds rather than what the future really holds.

For example, to test whether or not a stock price is reasonable or not, I use the estimates, especially the EPS estimates. So my stock price testing using the Price/EPS and using the Price/Graham Price Ratios use estimates. (My stock price testing using the Price/Book Value per share Ratio and the current dividend yield uses no estimates.)

After at least the first quarterly report, I can start to compare the estimates by analysts to what the company is really doing. For example, on Canadian Utilities Ltd, I find that the analysts are calling for a 6.57% increases in EPS in 2013. After the 2nd Quarterly report is in, I find that the EPS for the year ending year ending at the 2nd Quarter, the EPS are up 8.76% compared to the year ending in 2012. This shows that the analysts are probably on the right track in their EPS estimates.

On my other blog I am today writing about Canadian Utilities Ltd (TSX-CU, OTC-CDUAF)...continue...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

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