Do current‐year forecasts deserve investors' exclusive attention among analyst estimates?

Cheng‐tsu Huang, Chu‐hsuan Chang and Hsiou‐wei Lin

International Review of Finance, 2021, vol. 21, issue 2, 714-723

Abstract: This study demonstrates that in using security forecasts for equity valuation, it would be preferable to take into consideration of analyst multi‐year forecasts instead of exclusively employing current‐year earnings forecast because the latter forecast measure most typically incorporates non‐recurring and/or value‐irrelevant components of accounting earnings. In contrast, the same analyst's concurrent long‐term earnings estimates appear to be free from the influence of the non‐recurring earnings items. Namely, when a firm's long‐run profitability differs from current year earnings, long‐horizoned analyst forecasts add to identify the differences.

Date: 2021
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International Review of Finance is currently edited by Bruce D. Grundy, Naifu Chen, Ming Huang, Takao Kobayashi and Sheridan Titman

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