How accurate are Analysts Estimates?

Question

For an example Yahoo's next quarter growth estimate for a certain stock is 525%. How accurate is that? How about http://caps.fool.com?

Answer 1

There are many many academic studies regarding analyst accuracy using a variety of variables.  Many many of these.  But we all know about how dirty and corrupt the system became, and are unsure as to how effective recent changes like allegedly more stringent enforcement of firewalls,etc etc are.

here's one article as an example for you:

http://www.iijournals.com/JOI/DEFAULT.AS...

beginning of abstract:

"Patterns in Analysts' Long-Term Earnings Forecasts

Rich Fortin; James H. Gilkeson; Stuart Michelson

THE JOURNAL OF INVESTING

Winter 2007

This article examines the accuracy of analysts' long-term estimates (made before the beginning of the year being forecast) of annual operating earnings during the 1986�2002 period, as provided in the Thomson First Call I/B/E/S database."

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but there are analysts out there who work hand in hand w/snr mngmt and get TONS of guidance as to what earnings will be, and others who don't.  it's almost as if those analysts' estimates aren't even theirs...they're the target companies' CEO/CFOs'

Answer 2

If you take 10,000 forecasts from experts, there will be 50 of them right on the money, 1000 in a close proximity and the majority will be garbage. Unfortunately, nobody will know ahead of time, which forecasts will be right.

A bunch of monkeys with sticks can do the same job as any experts, its actually proven in a test.

Answer 3

How accurate?  The term doesn't even apply.

How?  Monkeys throwing darts do better.

Exactly. You answered your own question.

Answer 4

Growth estimate is 525%? hahahahaha

You have to be careful about percentages, they can be very deceptive.

If a company was losing money then made one penny, technically the "growth" is infinitely high and that tells you nothing.  

Another example. If you own a stock and it goes up 60% then falls 50% you did not make 10%. In reality you lost 20%.

$100 stock with 60% gain is worth $160.

$160 stock losing 50% is worth $80. You lost $20 or 20% of $100.

A percentage increase is dependent on the starting point.