EPS 1 and 2 year forecasts on a specific firm. 
Posted: 10 November 2014 06:49 AM   [ Ignore ]
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Hey guys,

I am reading a paper on equity valuation.

In one of the examples, the authors are doing a valuation on a specific firm, Alcoa Inc. in April 2002.
From the IBES database thye use the following two forecast values of EPS.

F1EPS: 0.9936
F2EPS: 1.6287

I have been looking and looking for several hours, but can’t replicate the forecast results by using IBES.

Any advice?

I have looked on both the Summary and the single forecasts from april 2002. Is it possible that it is an error in the paper?

Best regards

Jamil from Denmark.

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Posted: 11 November 2014 12:50 PM   [ Ignore ]   [ # 1 ]
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hi Jamil,

I suspect there has been a stock-split since the paper has been published. Given the #digits in the EPS forecast, these have been adjusted for stock splits (actual EPS forecasts don’t have fractions of cents).

This code pulls the unadjusted EPS forecasts

data z;
set ibes.statsumu_epsus;
if 
OFTIC eq "AA";
if 
year(STATPERSeq 2002;
if 
month(STATPERSeq 4;
if 
FPI IN (1,2);
run;
mean unadjusted estimates1.54 and 2.51 

The ratio between the 2-years EPS is very close to the ratio of 1.6287 and 0.9936.

Either way would work: use actual price and forecasts to compute the value, or use stock-adjusted values (as long as it is consistent: adjust both stock price and forecasts)

Hope this helps,

Joost

 

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Posted: 13 November 2014 04:44 AM   [ Ignore ]   [ # 2 ]
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Hey Joost smile

Thanks for the answer, if that is the case, they have made a mistake in the paper.

Jamil

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Posted: 13 November 2014 08:12 AM   [ Ignore ]   [ # 3 ]
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hi Jamil,

You’re welcome—did they use adjusted EPS forecasts and unadjusted stock price?

best regards,

Joost

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Posted: 13 November 2014 09:55 AM   [ Ignore ]   [ # 4 ]
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They use F1EPS: 0.9936 & F2EPS: 1.6287 and the LTG combined with the shares outstanding to estimate Netincome for the following years.
They use Shares/10^3 = 847,590.

But if you use Shares/10^3 = 847,590, you have to use the forecasts that you gave me.

Thanks a lot Joost, i will probably post some more newbie questions in the future. SAS and large datasets are not my strongest sides.

Any pdf tutorial available to understand the SAS-WRDS world?


Jamil

 

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Posted: 14 November 2014 01:30 PM   [ Ignore ]   [ # 5 ]
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hi Jamil,

Interesting—thanks for following up. I’m not aware of pdf tutorials for SAS-WRDS; feel free to post pdfs/questions/etc here smile

best regards,

Joost

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